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Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessHard
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If the debit side of the Realisation Account is ₹98,000 and the credit side is ₹1,05,000, what will be the result of the Realisation Account?

Answer and explanation

Correct answer: Profit of ₹7,000

The credit side exceeds the debit side by ₹1,05,000 − ₹98,000 = ₹7,000. Therefore, the Realisation Account shows a profit of ₹7,000, which is transferred to the partners’ capital accounts in their profit-sharing ratio. Option B is incorrect because a loss arises only when the debit side exceeds the credit side. Exam tip: In a Realisation Account, a credit balance indicates profit, while a debit balance indicates loss.

Related tags

DissolutionRealisation-AccountClosing-BusinessPartnership-AccountsClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 12 Mcq
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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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