Question

Sanjay became insolvent and recovered only 50 paise in a rupee as final settlement fromhim.​

Answer 1

Insolvency of a debtor means bankruptcy of debtor.

However there might be two conditions then

No amount is recovered from them

Partial amount is recovered from them.

The amount which is not paid by debtors is loss to the business called bad

Let take an example:

A debtor amounting Rs50000 became insolvent and nothing was recovered from his estate.

*Bad-A/c Dr. 50000

To A/c ………………. 50000

*P&L A/c Dr. 50000

To Bad-A/c……………50000