If realization expenses increase at the time of dissolution of a partnership firm, what will be the effect on the Realisation Account?

Correct answer: Loss will increase

Realization expenses are recorded on the debit side of the Realisation Account. Therefore, an increase in these expenses increases the debit balance and consequently increases the loss on realization. Option C is incorrect because realization expenses directly affect the account. Exam tip: Remember that assets transferred and realization expenses are generally recorded on the debit side, while proceeds from asset realization are recorded on the credit side.