During dissolution, after all necessary adjustments have been correctly recorded in the Realisation Account and the assets and liabilities have been settled, what is the final result if the account shows a credit balance?

Correct answer: Realisation profit

A credit balance in the Realisation Account means that the net proceeds from disposing of assets and settling liabilities exceed the relevant book values and realisation expenses. Therefore, it represents a realisation profit, which is transferred to the partners’ capital accounts in their profit-sharing ratio. A debit balance would represent a realisation loss. Exam tip: Credit balance in the Realisation Account means profit; debit balance means loss.