During the dissolution of a firm, if an external liability is only partially paid and the remaining amount is not waived, what happens to the balance?

Correct answer: It remains an outstanding liability to be paid later

When only part of a liability is paid and the creditor has not waived the balance, the unpaid amount continues as an outstanding liability and must be settled. The balance can be treated as a gain only when the creditor allows it as a concession or accepts the part payment in full settlement. Exam tip: Do not treat partial payment as full settlement; the unpaid balance remains a liability unless it is waived.