PRC-1 · Chapter 2 · Question 56 of 100
'Vertex Traders' owes Rs. 15,000 to 'Horizon Suppliers'. Conversely, 'Horizon Suppliers' owes Rs. 10,000 to 'Vertex Traders'. If they agree to a contra settlement, what is the amount of the offset entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 10,000
Explanation
A contra settlement offsets a mutual debt between two parties. The offset is always recorded at the lower of the two amounts (Rs. 10,000), leaving a remaining net payable of Rs. 5,000.
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