Question 22 of 53beginner🧠 RememberFill in the Blanks1 mark

No entry is required when a _____ (partner/creditor) accepts a fixed asset in payment of his dues.

Correct Answer

creditor

Exercise: Test your Understanding – III | Q: 6 | (Page 17)
For More Understanding

Explanation

The provided context explicitly states under point 7 that 'when a creditor accepts an asset in full and final settlement of his account, no journal entry needs to be recorded'. This is because the asset is simply taken over by the creditor, and no cash transaction occurs within the firm's books to record the settlement in this specific scenario. Conversely, if a partner takes over an asset, their Capital Account is debited, requiring an entry.

Solution Steps

  1. Step 1: Analyze the two options provided in the blank: 'partner' and 'creditor'.

  2. Step 2: Refer to point 7 in the context regarding 'settlement with the creditor through transfer of assets'.

  3. Step 3: Identify the rule: 'when a creditor accepts an asset in full and final settlement of his account, no journal entry needs to be recorded'.

  4. Step 4: Conclude that 'creditor' is the correct word to fill the blank.

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