Realisation Account and Revaluation Account are both used in partnership accounting, particularly during restructuring, but they serve different purposes. A Realisation Account is created when a partnership is dissolved to record the sale of assets and payment of liabilities, ultimately showing the profit or loss from winding up the business. A Revaluation Account, however, is used when there is a change in partnership (like admission or retirement of a partner) to adjust asset and liability values to their current market worth, reflecting any gains or losses from revaluation.

What is a Realisation Account?

A Realisation Account is used during the dissolution of a partnership or the liquidation of a company. This account is created to handle all asset and liability transactions during the winding-up process. Its primary purpose is to determine the gain or loss on the realization of assets and the settlement of liabilities, which is then shared among the partners according to their capital ratios.

Examples of Realisation Account Use:

1. Selling off company assets during the dissolution.
2. Paying off existing liabilities from the sale proceeds.
3. Distributing the remaining cash or dealing with a deficit among partners.

What is a Revaluation Account?

A Revaluation Account is used in partnership firms when there is a need to revalue assets and reassess liabilities upon the admission of a new partner, retirement, or any change in the partnership agreement. This account reflects the increase or decrease in the value of assets and liabilities, affecting the capital accounts of existing partners.

Examples of Revaluation Account Use:

1. Revaluing property or equipment to reflect current market values when a new partner joins.
2. Adjusting the value of liabilities, such as loan obligations that have changed due to market conditions.
3. Altering partner capital accounts to reflect changes due to revaluation.

Difference Between Realisation Account and Revaluation Account

Basis	Realisation Account	Revaluation Account
Purpose	To handle the dissolution of a partnership or company.	To adjust asset values and liabilities without dissolution.
When Used	At the time of winding up or dissolving.	When there are changes in partnership (e.g., admission, retirement).
Focus	Liquidating assets, settling liabilities, and calculating the resulting profit or loss.	Reassessing the value of assets and liabilities, affecting only the existing partners' equity.
Effect on Capital	Final effect as the business is closing.	Temporary effect, as the business continues with new values.
Accounting Impact	Results in closing the business accounts.	Leads to adjustments in partners' capital accounts but not closing the firm.
Outcome	Usually results in the cessation of business operations.	Adjusts the capital contributions without ceasing operations.
Examples	Selling off all assets and paying off all debts.	Increasing the value of land due to market appreciation before a new partner joins.