After transferring liabilities like creditors and bills payables in the Realization Account, in the absence of any information regarding their payment, such liabilities are treated as:

When liabilities like creditors and bills payable are transferred to the Realization Account during dissolution of a partnership, they are credited to the Realization Account. This represents the firm's obligation to pay these amounts.

For the Realization Account to be properly closed and the profit/loss on realization to be calculated, these liabilities must be settled. When they are paid, the Realization Account is debited (and Cash/Bank is credited).

In the absence of any information regarding their payment, the accounting assumption is that these liabilities have been fully paid.

This principle exists because:

The Realization Account records the complete process of winding up the firm's affairs. If liabilities are transferred to this account, the process isn't complete until they are discharged. Without any contrary information, it is presumed that the firm has met all its obligations and paid all liabilities in full.

This assumption ensures proper closure of accounts and calculation of profit or loss on realization. The partners' capital accounts can then be settled with the understanding that all external obligations have been fulfilled.

The correct treatment is Option 2: Fully paid