Question

On dissolution of a partnership firm, profit or loss on realisation is distributed among the partners:

• A. In Capital ratio
• B. In profit sharing ratio
• C. In sacrificing ratio
• D. Equally

Hint:

Realisation profit/loss is just another business result — shared like any trading profit, in the profit-sharing ratio.

Answer 1

The Correct Option is B

Step 1: Recall the purpose of the Realisation Account:
On dissolution, all assets are sold and liabilities paid off through the Realisation Account, and whatever profit or loss emerges belongs to the partnership as a whole, just like any other business profit or loss.

Step 2: Apply the general accounting rule for business profits:
Any gain or loss the firm makes, in the ordinary course or on winding up, is shared exactly as trading profits always were — in the agreed profit-sharing ratio, not in capital ratio (which may differ) or in sacrificing ratio (which only applies at admission).

Final Answer:
Profit or loss on realisation is distributed in the profit-sharing ratio.