On the dissolution of a firm, the Creditors are transferred to ______.

The correct answer is Option (1) → Realization Account

On dissolution, all outside liabilities, creditors included, are closed by transfer to the credit side of the Realisation Account (Creditors A/c Dr., To Realisation A/c). Their payment is then recorded on the debit side of the same account, so the profit or loss on settling them shows there.