Question

In the Realisation Account prepared on the dissolution of a firm, debit side is more than the credit side. It indicates ____________.

• A. there is a profit
• B. there is a loss
• C. liabilities are more then assets
• D. assets are more than liabilities

Answer 1

The correct option is B there is a loss

The main purpose to open Realisation Account is to ascertain the profit or loss due to the realisation of assets and liabilities at the time of dissolution of firm. Realisation profit (if credit side > debit side) or realisation loss (if debit side > credit side) are transferred to the Partner's Capital Accountin their profit sharing ratio.