Question

Assertion (A): Amount paid to discharge an unrecorded liability is credited to the Realisation Account.

Reason (R): Payment made to discharge an unrecorded liability is a loss to the firm and therefore is debited to the Realisation Account.

In the context of the above two statements, which option is correct?

Options

• Assertion (A) and Reason (R) are correct, but the Reason (R) is not the correct explanation of Assertion (A).

• Both, Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).

• Only Assertion (A) is correct.

• Assertion (A) is not correct, but the Reason (R) is correct.

Answer 1

Assertion (A) is not correct, but the Reason (R) is correct.

Explanation:

Paying an unrecorded liability is an expense/loss for the firm, so it must be debited to the Realisation Account, making the reason true. This means the assertion is false because paying a liability requires a debit to the Realisation Account and a credit to Bank Realisation A/c Dr. To Bank A/c, never a credit to the Realisation Account.