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At the time of dissolution of a partnership firm, an asset is sold for an amount higher than its book value. What will be the result in the Realisation Account?

Answer and explanation

Correct answer: Profit

When the sale proceeds of an asset exceed its book value, the excess represents a profit in the Realisation Account. This profit is ultimately transferred to the partners’ capital accounts in their profit-sharing ratio. Therefore, ‘no effect’ is incorrect. In the exam, always compare the sale proceeds with the book value.

Related tags

Partnership DissolutionRealisation AccountAsset SaleAccounting ProfitClass 12 AccountancyDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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