During dissolution, if all entries relating to assets, liabilities, realisation proceeds and payments are recorded on the exact opposite sides of the Realisation Account, what will be the effect?

Correct answer: The actual realisation profit or loss will be reversed, making the account incorrect

In a Realisation Account, assets transferred are normally debited, liabilities transferred are credited, and proceeds from assets and payments to settle liabilities are recorded on their prescribed sides. If every entry is posted on the exact opposite side, the difference between the debit and credit totals will also be reversed. Thus, the result will show the opposite of the actual realisation profit or loss, creating a serious accounting error. Option B is incorrect because the effect is not limited to cash; the realisation result also changes. Exam tip: remember the basic rule—transfer of assets is debited and transfer of liabilities is credited.