A creditor to whom ₹25,000 was due accepts stock of the book value of ₹20,000 at ₹18,000 and the balance in cash at the time of dissolution of partnership firm. For how much amount of journal entry is passed in the books of account?

₹7,000

The correct answer is option 4- ₹7,000.

For settlement with the creditor through transfer of assets when a creditor accepts an asset in full and final settlement of his account, no journal entry needs to be recorded. But, if the creditor accepts an asset only as part payment of his/her dues, the entry will be made for cash payment only. For example, a creditor to whom Rs. 10,000 was due accepts office equipment worth Rs. 8,000 and is paid Rs. 2,000 in cash, the following entry shall be made for the payment of Rs. 2,000 only.-
Realisation A/c Dr.
   To Bank A/c

So here, creditor is of ₹25,000 and he accepts asset for ₹18,000 means ₹7,000 will be paid by cash. So, the following journal entry is passed for remaining amount i.e. 7,000.
Realisation A/c Dr.   7,000
   To Bank A/c                  7,000