If an incorrect sale price is recorded instead of the actual sale proceeds of an asset in the Realisation Account at the time of dissolution, what will be the main effect?

Correct answer: The realisation profit or loss and the amount reflected in partners’ capital accounts will be incorrect

In the Realisation Account, the proceeds from the sale of an asset are credited. If an amount different from the actual sale proceeds is recorded, the credit side becomes incorrect and the resulting realisation profit or loss is misstated. That profit or loss is transferred to the partners’ capital accounts, so their closing capital balances may also be wrong. Option C is incorrect because an incorrect sale amount affects both the recorded Cash/Bank balance and the realisation result. Exam tip: Credit the actual sale proceeds to the Realisation Account and compare them with the asset’s book value to determine the correct profit or loss.