Question

What will be the entry for issued check for 8800 in full settlement

Answer 1

The transaction affects three accounts... creditor account (we owe money) , bank a/c(paid by Cheque 8500 ) , Discount recieved a/c( recieved ×××× )..

creditor account is a Personal account (as the name suggests)

bank account is a Real account (All the assets and Liabilities come under Real account; cash is an asset)

Discount Recieved is a nominal account (All expenses incomes gains losses come under nominal account and Discount recieved is a gain)


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..

creditor should be debited (he is the receiver)

Discount Recieved hould be debited (its a gain)

bank should be credited (cash is going out).


So the journal Entry will be...

creditor a/c Dr ××××

To Discount recieved a/c ××××

To bank a/c. 9850

(Being amount due to settled )

Answer 2

Let, the discount received amount be 'xxx'

Creditors A/C Dr   Rs. (xxx + 8,800)

   To Discount Received A/C Rs.xxx

   To Bank A/C  Rs.8,800

(being Creditors A/C settled by issuing a cheque)