Question

Received by cheque a first and final payment of 60 paise in a rupee from Y who owed us rupees 10000

Answer 1

Answer:

cash a/c - dr 6000

bad debts a/ c - dr 4000

to y a/ c 10000

Answer 2

We are provided information that we recieved 60p in a rupee from Y to settle his account. The account of Y will require to be settled as under:

• When the organization sells its goods on credit there is always the danger of the debtor not paying back the amount.
• In this case, also Y is the debtor who is not able to pay back the full amount of goods.
• The reason for this can be that now Y is insolvent and bankrupt so is unable to pay the amount.
• He is able to pay only 60% of the amount due which is given to us as 60 paise in a rupee.
• So the remaining 40 % will have to be transferred to the bad debts account.
• Bad debts account is that account which is maintained by the organization to make a note of the amounts that cannot be recieved from their debtors.
• So the transaction of settlement of the account will be written as:

        Cash a/c      Dr. 6000

    Bad Debts a/c Dr. 4000

To, Y's account                         10,000

(Being part of the payment made by Y)

In the above case, Cash is coming inside the organization so requires to be debited.

Bad debts are an expense of the organization so require to be debited

Y is paying the amount and settling his account so Y's account is being credited.

PROJECT CODE: #SPJ2

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