Features of Realisation Account
(i) Asset sales are documented in the realisation account at their realised value.
(ii) The settlement value of payments made to liabilities (creditors) is noted.
(iii) There will be a balance, which may be a profit or loss, once all transactions have been recorded.
(iv) Two circumstances result in profit.
(A) When assets are sold for more money than they are worth on paper.
Liabilities that are settled for less than their book value are referred to as (b).
(v) The outcome will be a loss if the two conditions are the opposite of one another.
(vi) The net gain or loss on realisation is to be added to the capital accounts of the partners according to their profit-sharing ratio.
What is a Realisation Account?
A fictitious account called the realisation account is formed in order to reflect the sale of assets and discharge of liabilities. To determine the profit or loss resulting from the realisation of assets and liabilities is the primary goal of opening a realisation account.
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