In case of dissolution, Machine costing ₹20,000, alongwith cash of ₹5,000 were given to creditors of ₹30,000 in full settlement of their claim.

In this case Realisation A/c will be Debited with..............

₹5,000

The correct answer is option 4- ₹5,000.

Realisation A/c will be Debited with ₹5,000.

Journal entry is made FOR CASH PAYMENT- 
Realisation A/c Dr. 5,000
      To Bank A/c            5,000

There can be 3 situations-

* If the creditor accepts an asset as full and final settlement, no journal entry is required.

* If the creditor accepts an asset as a partial payment, the entry is recorded for the cash payment portion only.

* If a creditor accepts an asset worth more than their outstanding debt, they will make a cash payment to the company for the remaining balance. In this case, the journal entry would be:
Debit: Bank or Cash A/c
Credit: Realisation A/c