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Subjects
Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessMedium
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On the dissolution of a partnership firm, what is a debit balance in the Realisation Account called?

Answer and explanation

Correct answer: Realisation Loss

A debit balance in the Realisation Account indicates that the loss arising from realising assets and settling liabilities exceeds the corresponding gains. This realisation loss is transferred to the partners’ capital or current accounts in their profit-sharing ratio. Exam tip: a credit balance means realisation profit, while a debit balance means realisation loss.

Related tags

Partnership DissolutionRealisation AccountRealisation LossAccounting TreatmentProfit Sharing RatioClosing 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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