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In the Realisation Account, if one asset is sold above its book value and another asset is sold below its book value, what is determined?

Answer and explanation

Correct answer: Net profit or loss

The Realisation Account records and offsets all gains and losses arising from the realisation of assets. Selling one asset above book value creates a gain, while selling another below book value creates a loss; their combined effect determines the net profit or net loss on realisation. Therefore, it is not necessarily only a profit or only a loss. In an exam, identify the final balance of the Realisation Account to determine the net result.

Related tags

Realisation AccountPartnership DissolutionNet Profit Or LossAccountancy Class 12Dissolution Of A Partnership FirmAccountancyClass 12 Mcq

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