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Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessHard
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At the dissolution of a firm, the Realisation Account has total debits of ₹1,20,000 and total credits of ₹1,28,000. What result will be obtained from this account?

Answer and explanation

Correct answer: Profit of ₹8,000

The credit side of the Realisation Account is ₹1,28,000, while the debit side is ₹1,20,000. Since credit exceeds debit by ₹8,000, the firm earns a profit of ₹8,000. This profit is transferred to the partners’ capital accounts in their profit-sharing ratio. Exam tip: In a Realisation Account, excess of credit over debit indicates profit, whereas excess of debit over credit indicates loss.

Related tags

Dissolution Of PartnershipRealisation AccountClosing The BusinessAccounting ProfitPartnership AccountsDissolution 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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