On dissolution of a firm, a creditor’s liability of ₹20,000 is recorded in the Realisation Account under the name of another creditor, although the amount is correct. What will be the primary effect?

Correct answer: The wrong creditor’s account will show an incorrect balance, affecting the record of liability settlement

Even though the amount is correct, recording the liability under the wrong creditor’s name is a ledger misclassification or misposting. The actual creditor’s account will show an incorrect balance, and the record of payment and settlement of the liability will be affected. A mere error in the name does not automatically change the total profit or loss on realisation, so option B is incorrect. Exam tip: if the amount is correct but the account is wrong, it is a classification error; the realisation result changes only when the amount or related accounting entry is also wrong.