At the time of dissolution, if the firm’s total assets and external liabilities are equal in amount, the assets are realised at their book value, the liabilities are settled at their book value, and there are no realisation or dissolution expenses, what will be the result in the Realisation Account?

Correct answer: No profit or loss

In the Realisation Account, the book value of assets is debited and the book value of external liabilities is credited. When both amounts are equal and there are no realisation or dissolution expenses, the account balances to zero; therefore, there is neither a realisation profit nor a realisation loss. A loss would arise if assets were realised below book value or if expenses were incurred. Exam tip: Determine realisation profit or loss from the difference between the credit and debit sides of the Realisation Account.