Model: Collection and payment of vendor’s debtors and creditors On 1 October 2010, Brilliant Ltd. purchased the business of Mr. Bose, a sole trader, taking over all the assets with the exception of book debts amounting to Rs.2,00,000 and creditors amounting to Rs.1,00,000. The company undertook to collect all the book debts and pay off the creditors and for this service, it has to be paid a commission of 2 1/2on the amount collected and 1/2% on amounts paid.
The debtors realized Rs.1,80,000, out of which Rs.80,000 was paid to creditors in full settlement. The company was able to collect Rs.8,000 debt which was previously written off as bad by Mr. Bose. The company was also forced to meet a contingent liability of Rs.5,000 on account of a claim against the vendor for damages. The vendor received Rs.20,000, 6% debentures of Rs.100 each at Rs.90 and the balance in cash in settlement of his account with the company. Journalise the above transactions in the books of the company.
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