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During dissolution, what will be the effect of recording the cash received from the sale of assets at an incorrect amount in the Realisation Account?

Answer and explanation

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

Cash received from the sale of assets is credited to the Realisation Account. If the amount is recorded incorrectly, the balance of the account changes, causing the profit or loss on realisation to be calculated incorrectly. Therefore, option A is correct. Option C is incorrect because cash proceeds from asset realisation are an important item in this account. Exam tip: In the Realisation Account, the book value of assets is debited and the proceeds from their sale are credited.

Related tags

Partnership DissolutionRealisation AccountAccounting ErrorsProfit Or LossAccountancy Class 12Dissolution Of A Partnership FirmAccountancyClass 12 Mcq

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