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To which account is the realisation profit transferred?

Answer and explanation

Correct answer: Partners' Capital Accounts

On dissolution, the realisation account determines the profit or loss arising from the realisation of assets and settlement of liabilities. Realisation profit is transferred to the partners’ capital accounts in their profit-sharing ratio. The Bank or Cash Account records the amount received, not the profit itself. Exam tip: both realisation profit and loss are transferred to partners’ capital accounts in the profit-sharing ratio.

Related tags

Partnership DissolutionRealisation AccountPartners Capital AccountsProfit Sharing RatioClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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