Answer & Solution
Answer: Option
C
Solution:
Correct Answer: C) Realisation
Let's break down why:
* Revaluation Account: This account is used to record the change in value (increase or decrease) of assets and liabilities. It reflects current market prices, not the original book value.
* Capital Account: This account tracks the owner's investment and profits/losses in a business. It doesn't directly deal with the book value of individual assets and liabilities during their disposal.
* Realisation Account: This account is specifically used when a partnership firm is being dissolved (closed down). The key thing is that assets are transferred to the realisation account at their original book value. Then, when the assets are sold or liabilities are paid off, the difference between the book value and the sale price (or settlement amount) is recorded as a profit or loss in the realisation account.
* Suspense Account: This is a temporary account used to hold amounts when there's uncertainty or a balancing issue in accounting. It's not related to the disposal of assets and liabilities at their book value.
Therefore, the Realisation Account is where assets and liabilities are initially recorded at their book value before they are sold or settled during dissolution.
