Question

Record necessary journal entries in the following cases

(a) Creditors worth Rs. 85,000 accepted Rs. 40,000 as cash and investment worth Rs. 43,000, in full settlement of their claim.

(b) Creditors were Rs. 16,000. They accepted Machinery valued at Rs. 18,000 in settlement of their claim.

(c) Creditors were Rs. 90,000. They accepted Buildings valued Rs. 1,20,000 and paid cash to the firm Rs. 30,000.

Answer 1

Journal Entries

$\begin{array}{ccccc}\text{Date}& \text{Particulars}& \text{L.F.}& \text{Amount (Rs.)}& \text{Amount (Rs.)}\\ \left(\text{a}\right)& \text{Realisation A/c}\text{Dr.}& & 40,000& \\ & \text{To Cash A/c}& & & 40,000\\ & \text{(Creditors worth Rs. 85,000 settled with Rs. 40,000}& & & \\ & \underset{–}{\text{and Cash and Investment worth Rs. 43,000})}& & & \\ \left(\text{b}\right)& \text{No entry will be passed as Liability is settled}& & -& \\ & \underset{–}{\text{against asset without any cash/bank transaction}}& & & -\\ \left(\text{c}\right)& \text{Cash A/c}\text{Dr.}& & 30,000& \\ & \text{To Realisation A/c}& & & 30,000\\ & (\text{Creditors worth Rs. 90,000 accepted building}& & & \\ & \text{worth Rs. 1,20,000 and paid back Rs. 30,000}& & & \\ & \text{in cash to firm after settlement of their claim})& & & \end{array}$