Most Upvoted Answer Rahul who owed us 20000 becomes insolvent and A final dividend of 60 p... Bank A/C Dr. 12000 Bad debts A/C Dr. 8000 To Rahul's A/C 20000 WORKING NOTES 20000×60/100 = 12000 Community Answer Rahul who owed us 20000 becomes insolvent and A final dividend of 60 p... Journal Entry for Receiving Final Dividend from Insolvent Debtor The journal entry for receiving the final dividend of 60 paise in the rupee from Rahul's estate would be: Bank Account Dr. 12,000 Bad Debts Recovered Cr. 8,000 Realization Account Cr. 4,000 Explanation Bank Account: The bank account is debited as the payment is received by cheque. The amount received is 12,000 rupees, which is 60% of the total debt of 20,000 rupees. Bad Debts Recovered: The bad debts recovered account is credited with the amount of 8,000 rupees, which represents the amount of the debt that was not recoverable. Realization Account: The realization account is credited with the remaining amount of 4,000 rupees. This account is used to record the expenses and income related to the realization of assets and liabilities of the insolvent debtor. Conclusion The above journal entry is made when a debtor becomes insolvent, and a final dividend is received from their estate. It is important to note that the amount of the final dividend received is usually a percentage of the total debt owed. In this case, the final dividend received was 60 paise in the rupee, which means 60% of the total debt was recovered. The debt that was not recoverable is written off as bad debts, and the remaining amount is credited to the realization account
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