dines was declared insolvent and a payment of 60 paise in a RS received from his estate by a cheque
Answers
Answered by
0
Ok Lets go by an example..
Total amount recoverable from Rajan = 1000
Actual Recovered = 60paise in a rules
Amount Recovered= 1000× 0.60 =600
Then loss on Debtor's = Amount Recoverable - amount Recovered
=1000-600 =400
This current transaction affects three accounts ..cash a/c( cash is received) ,
loss on Debtor's a/c (400 is not recoverable and account is settled)...Rajan a/c (He owes us money/he is our Debtor)
Where Cash a/c is real account (All assets and Liabilities come under it) ,Rajan a/c is a Personal account, loss on Debtor's is a nominal account (all expenses losses Gains income come under it )
The Three golden rules of accounting are
Personal Account - Debit the receiver, credit the giver
'Real' Account - Debit what comes in ,credit what goes out
Nominal account - Debit All expenses and losses, credit All incomes and gains
In contention with the above rules..
Cash is coming in ,Loss onDebtors being a loss..they should be Debited....Rajan being the Giver should be credited to that extent..
The Journal Entry will be..
Cash a/c. Dr. 600
Loss on Debtor's a/c Dr 400
To Rajan a/c. 1000
(Being Rajan account settled)
Total amount recoverable from Rajan = 1000
Actual Recovered = 60paise in a rules
Amount Recovered= 1000× 0.60 =600
Then loss on Debtor's = Amount Recoverable - amount Recovered
=1000-600 =400
This current transaction affects three accounts ..cash a/c( cash is received) ,
loss on Debtor's a/c (400 is not recoverable and account is settled)...Rajan a/c (He owes us money/he is our Debtor)
Where Cash a/c is real account (All assets and Liabilities come under it) ,Rajan a/c is a Personal account, loss on Debtor's is a nominal account (all expenses losses Gains income come under it )
The Three golden rules of accounting are
Personal Account - Debit the receiver, credit the giver
'Real' Account - Debit what comes in ,credit what goes out
Nominal account - Debit All expenses and losses, credit All incomes and gains
In contention with the above rules..
Cash is coming in ,Loss onDebtors being a loss..they should be Debited....Rajan being the Giver should be credited to that extent..
The Journal Entry will be..
Cash a/c. Dr. 600
Loss on Debtor's a/c Dr 400
To Rajan a/c. 1000
(Being Rajan account settled)
Similar questions