Full & Final Settlement Quiz

 AccountingQuizzes – Debtors & Creditors Account

Debtors & Creditors – Full & Final Settlement of Accounts Quiz

Your Business customer ABC Traders Account balance showed $1200 (Dr.) on 20th July 200A.

They paid $1000 cheque as full and final settlement of all their dues on 21st July 200A.

In this context,

a ) ABC Trader received $200 discount

b ) ABC Traders Account Balance becomes $200 Dr.

c ) ABC Traders Account Balance becomes $200 Cr.

d ) Your Business will return $200 to ABC Traders


Full & Final Settlement Quiz Explained

ABC Traders is your Business Customer or you can say they are your TRADE DEBTORS.

ABC Traders Owed you $1,200 on 20th July 200A. When someone owes you, it means they have to pay you that amount. The Debit balance is making it clear that ABC Traders owed you $1,200 on 20th July 200A.

On 21st July, your business & ABC Traders might have reached an agreement to settle the balance amount with a $1,000 cheque.

That means a full & final account settlement agreement has reached between the two parties, that is your Firm & ABC Traders and since ABC Traders will clear their $1,200 liability by paying you $1,000 cheque, that definitely means ABC traders have received a discount of $200 from you.

In other words, your business has allowed a discount of $200 to ABC Traders.

This is how ABC Traders Ledger account will look like (simplified format for understanding purpose only)

ABC Traders
Date Particulars Dr. Cr. Balance
20th July Balance $1,200 Dr.
21st July Bank A/c $1,000 $200 Dr.
21st July Discount Expense $200


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