Identify the correct sequence for preparation of realisation account.

(A) Determination of Realisation Gain/ Loss
(B) Transfer of outsider's Liabilities to Realisation A/c
(C) Realisation of Assets
(D) Transfer of Assets to Realisation A/c
(E) Payment of Liabilities and Realisation Expenses

Choose the correct answer from the options given below.

(D), (B), (C), (E), (A)

The correct answer is Option (1) → (D), (B), (C), (E), (A)

When the firm is dissolved, its books of account are to be closed and the profit or loss arising on realisation of its assets and discharge of liabilities is to be computed. For this purpose, a Realisation Account is prepared to ascertain the net effect (profit or loss) of realisation of assets and payment of liabilities which may be is transferred to partner’s capital accounts in their profit sharing ratio. The sequence for the preparation of realisation account is as follows-

* Transfer of Assets to Realization A/c (D): This step involves transferring all the assets of the business to the Realization Account. This includes any cash, inventory, investments, or other assets that the business possesses.

* Transfer of outsider's Liabilities to Realization A/c (B): Here, the liabilities owed to external parties (outsiders) are transferred to the Realization Account. These are the obligations the business needs to settle during the liquidation process.

* Realization of Assets (C): This step involves selling or converting the assets into cash. The proceeds from the sale of assets are then recorded in the Realization Account.

* Payment of Liabilities and Realization Expenses (E): Using the cash obtained from the realization of assets, the business pays off its liabilities (both external and internal) and any expenses incurred during the realization process.

* Determination of Realization Gain/Loss (A): After all assets have been realized, and liabilities and expenses settled, the Realization Account will show either a gain or a loss. This gain or loss is determined by comparing the total realized amount with the total liabilities and expenses.