On dissolution of a firm, if all assets, liabilities and realisation-related transactions are correctly recorded in the Realisation Account, what does the account’s final balance represent?

Correct answer: वास्तविकरण पर लाभ या हानि, जिसे साझेदारों के पूंजी खातों में हस्तांतरित किया जाता है (Profit or loss on realisation transferred to partners’ capital accounts)

The Realisation Account records the book value of assets transferred, proceeds from their realisation, settlement of liabilities and realisation expenses. The difference between its two sides represents profit or loss on realisation. A profit is transferred to the partners’ capital accounts by debiting the Realisation Account, whereas a loss is transferred by crediting it. Therefore, the result may be either profit or loss, not profit alone. Exam tip: The final difference in the Realisation Account is ultimately transferred to the partners’ capital accounts in their profit-sharing ratio.