Question

What will be the journal entry for amount due to a creditor rs 5000 settled for rs.4980?

Answer 1

actually payable= 5000

total Amount paid= 4980

Discount recieved = 5000 -4980 = 20 its a gain to us....

The transaction affects three accounts... creditors account (we owe money) , Cash a/c(paid 4980 ) , Discount recieved a/c( recieved 20 Discount )..

creditors 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)

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)

Cash should be credited (it is going out).


So the journal Entry will be...

creditors Dr 5000

To Discount recieved a/c 20

To cash a/c. 4980

(Being amount due to creditor settled )