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When, on dissolution of a partnership firm, all assets are sold immediately for cash, what will be the immediate effect?

Answer and explanation

Correct answer: Cash received from the sale of assets will be recorded immediately

When assets are sold immediately for cash, the amount received is recorded at once as cash realisation in the Realisation Account. The timing of sale does not guarantee a profit; profit or loss depends on the difference between the sale proceeds and the book value of the assets. Therefore, option D is incorrect. Exam tip: Do not equate immediate sale with certain profit—compare sale proceeds with book value to determine the result.

Related tags

Partnership DissolutionRealisation AccountSale Of AssetsCash RealisationAccounting McqDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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