At the time of dissolution, a liability is settled for an amount lower than its book value. What will be the effect on the Realisation Account?

Correct answer: लाभ (Profit)

If a liability has a book value of ₹10,000 but is settled for ₹8,000, the firm saves ₹2,000, resulting in a profit. In the Realisation Account, the book value of the liability is credited and the amount paid is debited; the difference is a gain. Exam tip: Settlement below book value gives a profit, while settlement above book value gives a loss.