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What is the effect if a transaction that should be recorded in the Realisation Account is omitted?

Answer and explanation

Correct answer: The profit or loss on realisation will be incorrect

The Realisation Account records transactions such as the sale of assets, settlement of liabilities and realisation expenses. If a relevant transaction is omitted, the total debit or credit of the account becomes incorrect, causing the profit or loss on realisation to be misstated. Therefore, ‘no effect’ is incorrect. Exam tip: Before calculating realisation profit or loss, check every asset, liability and realisation expense entry.

Related tags

Realisation AccountDissolution Of PartnershipAccounting ErrorsRealisation Profit Or LossPartnership AccountsDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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