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Subjects
Class 12AccountancyDissolution of a Partnership FirmClosing the BusinessHard
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The Realisation Account is used to determine which type of profit or loss?

Answer and explanation

Correct answer: Profit or loss on realisation

The Realisation Account determines the profit or loss arising from the realisation of assets and settlement of liabilities at the time of dissolution. Gross profit, net profit and operating profit relate to normal business operations, not to the realisation process during dissolution. Exam tip: Realisation profit or loss is transferred to the partners’ capital accounts in their profit-sharing ratio.

Related tags

Dissolution Of PartnershipRealisation AccountClosing The BusinessAccounting ConceptsPartnership 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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