A creditor to whom ₹10,000 was due accepts office equipment worth ₹15,000 at the time of dissolution of the partnership firm. What will be done with the extra amount of ₹5,000 of the office equipment?

Given to firm by creditor

The correct answer is option 2- Given to firm by creditor.

The creditor was owed only Rs 10,000 but accepted office equipment worth Rs 15,000. This means the creditor has received assets worth Rs 5,000 extra. Therefore, the excess amount of Rs 5,000 is treated as cash payable by the creditor to the firm.

* 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.

* However, when a creditor accepts an asset whose value is more than the due amount he/she pay cash to the firm for the difference for which the entry will be:
Bank A/c Dr.
   To Realisation A/c 

Note: The question merely states that a creditor of ₹10,000 “accepts office equipment worth ₹15,000.” It nowhere mentions that the creditor agreed to waive the excess amount or that the asset was accepted “in full and final settlement” without adjustment. Therefore, as per the normal accounting practice (as mentioned in NCERT)  the creditor is entitled only to the amount due to him, i.e. ₹10,000. Since the firm has transferred an asset worth ₹15,000, the excess value of ₹5,000 still belongs to the firm and must be paid back by the creditor. Hence, Option 2 remains correct.