Question

Received rs 995 from harikishan in full settlement of his account rs 1000 answer account

Answer 1

Journal entry

Cash A/c                      Dr    995

Discount allowed A/c   Dr      5

            To Harikrishan A/c               1000

(being received cash from hari krishan on full settlement )

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Reason:

Cash comes into the company therefore its debited

discount allowed is the expense to the company therefore its debited

Hari krishna is the debtor who pays the money therefore its credited

Answer 2

Journal Entry :

Cash A/C    Dr      Rs.995

Discount Allowed A/C    Dr    Rs.5

         To Harikrishan A/C     Rs.1000

(Being payment receiced from Harikrishan)

Explanation :

Previously, Harikrishan was our debtor. we would have debited. But now, he has settled his account. So, he is no more our debtor. Hence, credited.

Cash comes into the business/ Cash balance increases. According to the real account principle, Cash A/C is debited.

Discount Allowed is a loss for the business. According to Nominal A/C principle, it is debited.