Question

Select the most appropriate alternative from those given below :

If any unrecorded liability is paid on dissolution of the firm____________ account is debited.
a) Cash/Bank A/c
b) Realisation A/c
c) Partner’s Capital A/c
d) Loan A/c

Answer 1

If any unrecorded liability is paid on dissolution of the firm, then Realisation account is debited.

Explanation: All the liabilities are paid-off by debiting the Realisation A/c. This is because all the payments are made through the Realisation Account, so that the true profits or losses can be ascertained.