Name the Account which is prepared for finding the profit or loss on getting amount from selling of all assets and paying amount of liabilities.a)Cr.Side of Revaluation Accountb)Dr. side of Revaluation Accountc)Dr. side of Realisation Accountd)Cr. Side of Realisation AccountCorrect answer is 'D'. Can you explain this answer?

Question

Answer

Cr.side of realisation account..

Answer

Ans: Option 'D' is correct because----(1)..MEANING OF REALISATION ACCOUNT--: This account is prepared at the time of DISSOLUTION of a firm to know the PROFIT/LOSS at the time of dissolution of the firm. All the assets except cash/bank are transferred to the DEBIT SIDE of realisation account.(2).. PURPOSE OF REALISATION ACCOUNT--The main purpose to open REALISATION ACCOUNT is to ascertain the profit or loss due to the realisation of assets and liabilities. REALISATION PROFIT --(if credit side > debit side)OR REALISATION LOSS (if debit side > credit side) are transferred to the PARTNER'S CAPITAL ACCOUNT in their profit sharing ratio.

Answer

There is no specifications about what is sold or paid as the options Give Dr. or cr. sides of realisation a/c the answers are a bit confusing can someone help

Answer

Yes

Answer

Explanation:
The correct answer is option 'D', which is the credit side of the Realisation Account.

The Realisation Account is prepared to determine the profit or loss on the realization of assets and settlement of liabilities during the process of winding up a partnership firm or company. It records all the transactions related to the sale of assets, payment of liabilities, and distribution of the remaining amount among the partners or shareholders.

Here is a detailed explanation of the Realisation Account:

1. Purpose of the Realisation Account:
The Realisation Account is prepared to find out the profit or loss on the realization of assets and payment of liabilities during the winding up process.

2. Nature of the Realisation Account:
The Realisation Account is a nominal account as it does not represent any specific asset or liability. It is used to record the transactions related to the realization process.

3. Entries in the Realisation Account:
The Realisation Account has both debit and credit entries. The debit side of the account records the sale proceeds of assets, payment of liabilities, and other expenses incurred during the realization process. The credit side of the account records the realization of liabilities, any gain on the sale of assets, and the distribution of the remaining amount among the partners or shareholders.

4. Treatment of Profit or Loss:
If the credit side of the Realisation Account exceeds the debit side, it indicates a profit on realization. This profit is transferred to the Capital Accounts of the partners or the Shareholders' Equity Account in the case of a company. On the other hand, if the debit side exceeds the credit side, it indicates a loss on realization, which is distributed among the partners or shareholders in their profit sharing ratio.

5. Final Balance of the Realisation Account:
After all the assets are realized, liabilities are paid off, and the remaining amount is distributed, the Realisation Account should ideally have a zero balance. Any remaining balance indicates an error in the accounts.

In conclusion, the Realisation Account is prepared to determine the profit or loss on the realization of assets and payment of liabilities during the winding up process. The credit side of the Realisation Account represents the realization of liabilities and any gain on the sale of assets. Therefore, the correct answer is option 'D', Cr. Side of Realisation Account.

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