Plz explain me the following :
Rahul become insolvent, who owed is Rs 2,000 a final dividend of 60 paise in a rupee is received from his estate.
Rahul became insolvent means he is not in a position to pay the amount due from him (either in full or partial) because of some reason. This amounts to bad-debts for the business.
Amount due from Rahul = Rs 2,000
Amount Recoverable from Rahul = Rs 1,200 (Rs 2,000*0.60)
Amount not recoverable from him (Bad-Debts) = Rs 800 (Rs 2,000-1,200)
The Journal Entry for the above is as follows:
Amount due from Rahul = Rs 2,000
Amount Recoverable from Rahul = Rs 1,200 (Rs 2,000*0.60)
Amount not recoverable from him (Bad-Debts) = Rs 800 (Rs 2,000-1,200)
The Journal Entry for the above is as follows:
| Journal Enntry | ||||||
| Date | Particulars | L.F. | Debit AmountRs | Credit AmountRs | ||
| Cash/Bank A/c | Dr | 1,200 | ||||
| Bad-Debts A/c | Dr | 800 | ||||
| To Rahul’s A/c | 2,000 | |||||
| (Rahul, a debtor for Rs 2,000 became insolvent, 60 paise on a rupee is recoverable from him. | ||||||