Question

What is ‘Realisation Account’?

Hint:

Opened only at dissolution, to record sale of assets and payment of liabilities and find realisation profit/loss.

Answer 1

Step 1: Picture it as a clearing account for the shutdown process:
Every asset the firm owns and every liability it owes gets funnelled through this one account during winding up, instead of being closed individually into the balance sheet.

Step 2: Identify its final output:
Once all assets are realised (converted to cash) and all liabilities discharged, the balancing figure left in the account is either a profit or a loss, which is then transferred to the partners' capital accounts in their profit-sharing ratio.

Final Answer:
It is the dissolution-time account through which all assets are sold and liabilities paid off, its balance showing the firm's overall profit or loss on realisation.