On what basis is profit or loss determined in the Realisation Account?

Correct answer: From the difference between the totals of the debit and credit sides

The Realisation Account records items relating to assets, liabilities and realisation expenses. The difference between the totals of its debit and credit sides represents profit or loss: a higher credit total indicates profit, while a higher debit total indicates loss. Therefore, considering only asset sales or only expenses is incorrect. Exam tip: total both sides first, then identify the difference as profit or loss.