Accountancy Part ADissolution of Partnership Firm

Select the entry that is to be made when a creditor accepts an asset…

Select the entry that is to be made when a creditor accepts an asset in full and final settlement of his account.

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → No Entry

When a creditor takes an asset in full and final settlement, the asset is already on the debit side and the creditor on the credit side of the Realisation Account. Both are settled together and no cash moves, so no journal entry is needed.

An entry is needed only when cash also changes hands: if the creditor accepts the asset only in part payment, the cash paid to him is recorded (Realisation A/c Dr. To Bank A/c).

NCERT (2026-27 edition):
Journal Entries – “… 7. 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.”