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When an asset is sold above its book value at the time of dissolution, what will be recorded in the Realisation Account?

Answer and explanation

Correct answer: Profit

When the sale proceeds of an asset exceed its book value, the difference is a profit on realisation. This profit is transferred from the Realisation Account to the partners’ capital accounts. Therefore, ‘no effect’ is incorrect. In the examination, compare the sale proceeds with the book value, not with the original cost.

Related tags

AccountancyClass 12Dissolution Of PartnershipRealisation AccountSale Of AssetsDissolution Of A Partnership FirmClass 12 Mcq

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