What is the main purpose of Realisation Account on dissolution of a firm?

Correct answer: To ascertain profit or loss on settlement of assets and liabilities

The governing accounting concept is dissolution of a partnership firm. At dissolution, the firm’s assets are sold or otherwise realised and its liabilities are settled. The Realisation Account records the book values of assets transferred to it, liabilities settled, realisation expenses, and the amounts received or paid during this process. The resulting balance represents profit or loss on realisation, which is transferred to the partners’ capital accounts in their profit-sharing ratio. Therefore, option A is correct. Admitting a new partner belongs to reconstitution, bank reconciliation belongs to banking records, and stock valuation alone is only one possible transaction, not the account’s main purpose.