On dissolution of a partnership firm, what does a credit balance in the Realisation Account indicate?

Correct answer: Profit on realisation

A credit balance arises when the credit items of the Realisation Account, such as proceeds from the sale of assets and settlement of liabilities, exceed the debit items. It represents a profit on realisation, which is transferred to the partners’ capital or current accounts in their profit-sharing ratio. In contrast, a debit balance represents a loss on realisation. Exam tip: remember—credit balance means profit, while debit balance means loss.