Ram who owned debt is 20000 rupees become insolvent.Only 60 paise received his assets
Answers
Answer:
total debt (recoverable) = 2000
actually Recovered = 0.60 paise
2000×0.60= 1200
Non Recoverable= 2000-1200 = 800.. Amounts to Bad debts..
its a loss...
The transaction affects three accounts... Rahul account (he owes money) , Cash a/c(recieved 60 paise Per rupee) , Bad debts a/c( 0.40Per rupee is unrecoverable)..
Rahul account is a Personal account (as the name suggests)
cash account is a Real account (All the assets and Liabilities come under Real account; cash is an asset)
Bad debts account is a nominal account (All expenses incomes gains losses come under nominal account and Bad debts is a loss)
The Three golden rules of accounting are..
Personal account - Debit the receiver credit the giver..
Nominal account - Debit All expenses and losses, credit All incomes and gains
Real account - Debit what comes in ,credit what goes out.
in contention with the above rules..
Rahul should be credited (he is the giver)
Bad debts should be debited (its a loss)
Cash should be debited (it is comingin).
So the journal Entry will be...
Cash a/c Dr 1200
Bad debts a/c Dr 400
To Ram a/c. 2000
(Being Ram account settled)
Explanation:
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