In full settlement of Rs. 2,100 and Rs. 2,050
- Explanation:
In accounting, when a company pays its creditors in full settlement of a debt, it means that the company has paid the entire outstanding amount that it owes to the creditor. In this case, the company has paid Rs. 2,100 and Rs. 2,050 to two different creditors respectively.
- Importance of full settlement:
Paying creditors in full settlement is important for maintaining good relationships with suppliers and vendors. It also helps in avoiding any legal actions that creditors may take against the company for non-payment of debts.
- Impact on financial statements:
When a company pays its creditors in full settlement, it affects the company's balance sheet by reducing the amount of accounts payable. This, in turn, reduces the company's liabilities and improves its financial position.
- Ensuring accuracy:
It is crucial for companies to ensure that payments made to creditors are accurately recorded in their accounting records. This helps in maintaining transparency and accuracy in financial reporting.
- Conclusion:
Paying creditors in full settlement of debts is a standard practice in accounting to maintain good relationships with suppliers, vendors, and creditors. It is important for companies to accurately record these transactions to ensure transparency and compliance with accounting standards.