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What does the final balance of the Realisation Account indicate?

Answer and explanation

Correct answer: Profit or loss on realisation

The Realisation Account records the realisation of assets, settlement of liabilities and realisation expenses. Its final balance shows the profit or loss on realisation, which is transferred to the partners’ capital accounts in their profit-sharing ratio. Therefore, it is not limited to profit, loss or cash received alone. Exam tip: Remember that the profit or loss on realisation is distributed among the partners.

Related tags

Dissolution Of PartnershipRealisation AccountClosing The BusinessPartnership AccountsProfit Or LossDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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