In the case of dissolution of a partnership firm, unrecorded liabilities when paid are shown in:
- ADebit of Realisation Account
- BCredit of Realisation Account
- CDebit of Bank Account
- DCredit of Capital account.
Solution & Step-by-step Explanation
When an unrecorded liability is discharged during dissolution, cash flows out of the business, and it is logged as a settlement expense. The standard entry passed is to debit the Realisation Account and credit the Bank Account.