In the case of dissolution of a partnership firm, unrecorded liabilities when paid are shown in:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Debit of Realisation Account
An unrecorded liability is not in the books, so there is nothing to transfer to the Realisation Account at the start. When it is paid on dissolution, the payment is a loss of realisation like any other liability paid, so the entry is Realisation A/c Dr., To Bank A/c: it appears on the debit side of the Realisation Account (and on the credit side of the Bank Account).
NCERT (2026-27 edition):
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