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Question : Half of the Trade Creditors valued Rs 40,000 accepted Plant and Machinery at 10% less than the book value and Cash of Rs. 5,000 in full settlement of their claims. The remaining Trade Creditors were paid at a discount of 10%. The entry will be

Option 1: Realization account debited and Bank account credited by Rs 5,000

Option 2: Realization account debited and Bank account credited by Rs 36,000

Option 3: Realization account debited and Bank account credited by Rs 41,000

Option 4: Realization account debited and Bank account credited by Rs 80,000


Team Careers360 25th Jan, 2024
Answer (1)
Team Careers360 27th Jan, 2024

Correct Answer: Realization account debited and Bank account credited by Rs 41,000


Solution : Answer = Realization account debited and Bank account credited by Rs 41,000

Total value of creditors= 80,000(40,000×2)
Paid cash= 5,000
Paid to creditor= 40,000- 4,000(40,000×10%)= 36,000.
Total payment  = 41,000.

Realisation A/C Dr 41,000
To Bank A/C 41,000.
Hence, the correct option is 3.

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