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On dissolution of a firm, if the amount realised from the sale of assets is more than their book value and, after other adjustments, the credit side of the Realisation Account exceeds its debit side, what will be the result?

Answer and explanation

Correct answer: Profit

When the credit side of the Realisation Account exceeds its debit side, the difference represents a profit. This profit is transferred to the partners’ capital accounts in their profit-sharing ratio. If the debit side were higher, it would indicate a loss. Exam tip: Credit excess means realisation profit; debit excess means realisation loss.

Related tags

AccountancyPartnership DissolutionRealisation AccountRealisation ProfitClass 12Dissolution Of A Partnership FirmClass 12 Mcq

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