A creditor for 25000 accepted furniture at 20000 in settlement
Journal entry?
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If an asset is given away to a creditor in part ort full payment of his dues, the agreed amount of the asset is deducted from the claim of the creditor and the balance is paid to him.
No entry is passed for the transfer of an asset to the creditor.
So for the entry I have asked whether entry for payment of 5000 will be recorded or furniture will be given to creditor for full settlement??
Since in the question u have written that the creditor has accepted the furniture in full settlement , so no entry for the balance Rs5000.
I have used the word only settlement…not full settlement….that is what i want to know….if the word only settlement is used the entry for 5000 will be passed or not
Full settlement and settlement means the same.
For example, if an amount of 100000 is due from the creditor and he agrees to take furniture at 70000 and balance in cash , the following entry would be passed;
realisation a\c……dr 30000
To bank a\c 30000
In the above example they have not said that the furniture is accepted by the creditor in full settlement….that’s the difference …..
I hope I could explain it!!!!!
NO JOURNAL ENTRY required
the same will not be recorded in the books
as we show no entry for asset taken over by creditors in the realisation account.