Answer:

total debt (recoverable) = 2000

actually RECOVERED = 0.60 paise

2000×0.60= 1200

Non Recoverable= 2000-1200 = 800.. Amounts to Bad debts..

its a loss...

The transaction affects three accounts... Rahul account (he owes MONEY) , CASH a/c(recieved 60 paise Per rupee) , Bad debts a/c( 0.40Per rupee is unrecoverable)..

Rahul account is a Personal account (as the name suggests)

cash account is a REAL account (All the assets and Liabilities come under Real account; cash is an asset)

Bad debts account is a nominal account (All expenses incomes gains losses come under nominal account and Bad debts is a loss)

The Three golden rules of accounting are..

Personal account - Debit the receiver credit the giver..

Nominal account - Debit All expenses and losses, credit All incomes and gains

Real account - Debit what comes in ,credit what goes out.

in contention with the above rules..

Rahul should be credited (he is the giver)

Bad debts should be debited (its a loss)

Cash should be debited (it is comingin).

So the journal Entry will be...

Cash a/c Dr 1200

Bad debts a/c Dr 400

To Ram a/c. 2000

(Being Ram account settled)

Explanation:

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