Question 23 of 53beginner🧠 RememberFill in the Blanks1 mark

When creditor accepts an asset whose value is much more than the amount due to him, he will _____ (pay/not pay) the excess amount which will be credited _____ Account.

Correct Answer

pay; Realisation

Exercise: Test your Understanding – III | Q: 7 | (Page 17)
For More Understanding

Explanation

According to the textbook context, when a creditor accepts an asset whose value is more than the amount due to them, they pay cash to the firm for the difference. The journal entry for this transaction is: Bank A/c Dr. To Realisation A/c. This means the excess amount received from the creditor is credited to the Realisation Account.

Solution Steps

  1. Step 1: Identify the situation - creditor accepts an asset worth MORE than the amount due to them

  2. Step 2: The creditor must pay the excess amount (difference between asset value and dues) to the firm

  3. Step 3: The amount received is debited to Bank Account and credited to Realisation Account

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