What does the closing balance of the Realisation Account represent?

Correct answer: Profit or loss on realisation

The closing balance of the Realisation Account represents the profit or loss arising from the realisation of assets and settlement of liabilities. A credit balance indicates profit, while a debit balance indicates loss; this balance is transferred to the partners’ capital accounts. Therefore, it is not limited to profit, loss, or cash received alone. Exam tip: remember—credit balance means profit and debit balance means loss.