Unrecorded liabilities at the time of dissolution when paid are shown in:

Debit of Realisation Account

The correct answer is Option (1) → Debit of Realisation Account.

Unrecorded liabilities when paid are shown on the Debit side of Realisation Account.

For settlement of any unrecorded liability, the following journal entry is passed-
Realisation A/c Dr.
   To Bank A/c
(Expenses paid)

Bank balance is reduced so it is credited. On the debit side, we put realisation account.

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