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Subjects
Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessEasy
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What is the process of selling the assets and converting them into cash at the time of dissolution of a firm called?

Answer and explanation

Correct answer: Realisation

At the dissolution of a firm, the process of selling assets and receiving cash from them is called realisation. A Realisation Account is prepared to record the sale of assets, realisation expenses and settlement of liabilities. Depreciation means a fall in the value of an asset over time, not its conversion into cash. Exam tip: Asset sales and dissolution-related settlement entries are recorded in the Realisation Account.

Related tags

Partnership DissolutionRealisation AccountAsset SaleClosing BusinessAccountancy Class 12Closing The BusinessDissolution Of A Partnership FirmAccountancy
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10 more MCQs
  1. 1What is the process of permanently closing a partnership firm and ending its existence called?
  2. 2Which account is prepared at the time of dissolution of a firm to determine the profit or loss arising from the settlement of its assets and external liabilities?
  3. 3What is generally done with the assets of a partnership firm at the time of its dissolution?
  4. 4On dissolution of a partnership firm, from what are the external liabilities generally paid?
  5. 5To which account is the realisation profit transferred?
  6. 6To which account is the realisation loss transferred?
  7. 7What happens to the existence of the firm after dissolution?
  8. 8Dissolution expenses are generally debited to which account?
  9. 9At the time of dissolution, if an asset is sold for ₹10,000, what amount will be credited to the Realisation Account?
  10. 10On dissolution of a firm, to whom is the final cash balance paid after settling outside liabilities and other amounts due?
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