What will be the effect of an increase in the expenses recorded in the Realisation Account at the time of dissolution of a partnership firm?

Correct answer: The loss in the Realisation Account will increase

At the time of dissolution, realisation expenses are debited to the Realisation Account. Therefore, an increase in these expenses raises the debit total and increases the loss in the Realisation Account, or reduces its profit. It cannot increase the realisation profit. Exam tip: Expenses in the Realisation Account are debited, so higher expenses mean a higher loss.