Nisha A/c. Dr. To cash A/c. To Discount receive A/c.

Journal Entry for Full Settlement of Debt

To record the full settlement of debt with Nisha, you need to make a journal entry to reflect the transaction accurately. Here's how you can do it:

Heading: Journal Entry for Full Settlement of Debt

1. Identify the Accounts Involved:
In this transaction, you will typically have two accounts involved:

- Nisha's Account: This represents the individual or entity to whom the debt is owed.
- Cash or Bank Account: This represents the account from which the payment is made.

2. Determine the Amount:
To record the full settlement of debt, you need to know the exact amount paid to Nisha. Ensure that you have accurate information regarding the principal amount, any accrued interest, and any additional charges or fees associated with the debt.

3. Debit and Credit Entries:
To record the full settlement of debt, you will make the following entries:

- Debit Nisha's Account: Increase the balance in Nisha's account to reflect the payment received. The specific account used will depend on the nature of the original debt. For example, if Nisha's account represents accounts receivable, you would debit "Accounts Receivable."
- Credit Cash or Bank Account: Decrease the balance in the cash or bank account from which the payment is made. If the payment is made in cash, credit the "Cash" account. If the payment is made through a bank, credit the respective bank account.

4. Example Journal Entry:
Assuming the full settlement amount paid to Nisha is $1,000, the journal entry would be as follows:

Accounts Receivable $1,000
Cash $1,000

- The debit to "Accounts Receivable" increases the balance in Nisha's account, reflecting the payment received.
- The credit to "Cash" reduces the balance in the cash account, reflecting the outflow of funds.

5. Supporting Documentation:
It is essential to maintain supporting documentation for the transaction, such as a payment receipt, settlement agreement, or any other relevant paperwork. These documents serve as evidence of the full settlement and can be useful for future reference or audit purposes.

By following these steps and making the appropriate journal entries, you can accurately record the full settlement of debt with Nisha. Remember to consult with a professional accountant or refer to your company's accounting policies to ensure compliance with any specific rules or regulations.