Accrued interest will be firstly due on debit side of realisation account with book value and then it is realised on credit side with market value if given in question.

Treatment of Accrued Interest in Balance Sheet in Dissolution

Accrued interest refers to the interest income that has been earned but not yet received or recorded in the books of accounts. In the case of dissolution, the treatment of accrued interest in the balance sheet depends on whether the interest is accrued on assets or liabilities.

1. Accrued Interest on Assets:
If there is accrued interest on assets, it is considered as an asset and is recorded on the balance sheet. The treatment of accrued interest on assets is as follows:

- Accrued Interest Receivable: The amount of accrued interest is recorded as an accrued interest receivable on the asset side of the balance sheet.
- Classification: It is classified under current assets as it represents income that is expected to be realized within the next accounting period.

2. Accrued Interest on Liabilities:
If there is accrued interest on liabilities, it is considered as a liability and is recorded on the balance sheet. The treatment of accrued interest on liabilities is as follows:

- Accrued Interest Payable: The amount of accrued interest is recorded as an accrued interest payable on the liability side of the balance sheet.
- Classification: It is classified under current liabilities as it represents an expense that is expected to be settled within the next accounting period.

Example:
Let's consider a dissolution scenario where a company has accrued interest on its investments. The accrued interest receivable will be recorded as follows:

Assets:
- Investments: xxx
- Accrued Interest Receivable: xxx

The accrued interest payable will be recorded as follows:

Liabilities:
- Accrued Interest Payable: xxx

Conclusion:
In the dissolution process, the treatment of accrued interest in the balance sheet involves recording accrued interest as an asset (accrued interest receivable) if it is accrued on assets or as a liability (accrued interest payable) if it is accrued on liabilities. This ensures that the accrued interest is appropriately reflected and accounted for in the balance sheet during the dissolution process.