Question

Investments of ₹ 2,00,000 were not shown in the books. One of the creditors took these investments in settlement of his debt of ₹ 2,20,000. How much amount will be payable to that creditor?

Options

• 20,000

• 2,20,000

• 4,20,000.

• Nil

Answer 1

Nil

Explanation:

When a creditor accepts an asset in full settlement of their debt, no final cash or cheque payment is made to that creditor, and no journal entry is passed for the transfer in the books.

Even though the investments were unrecorded (not shown in the books), they were handed over directly to satisfy the creditor's claim of ₹ 2,20,000. Since the creditor accepted them as a complete settlement for the debt, the firm owes them nothing further. Therefore, the amount payable to that creditor is exactly Nil.