In case of dissolution, identify where the unrecorded liabilities when paid are shown:

Debit of Realisation account

The correct answer is Option (1) - Debit of Realisation account.

Unrecorded liabilities are those liabilities which are not recorded in the books of account. The accounting treatment for unrecorded liability is-

* When the unrecorded liability is paid off:
Realisation A/c Dr.
      To Bank A/c

* When it is paid by the partner then Partner's Capital account is credited instead of bank account.