At the time of dissolution, if all the firm’s assets are sold at their book values and there are no realisation expenses, what will be the result in the Realisation Account?

Correct answer: Neither profit nor loss

In the Realisation Account, the proceeds from the sale of assets are compared with their book value. When the sale proceeds equal the book value and there are no realisation expenses, the two amounts are equal; therefore, neither a profit nor a loss arises. Realisation expenses, if any, could create a loss. Exam tip: use sale proceeds minus book value as the basic basis for determining realisation profit or loss.