Final answer:
The Rs. 100 that Garima did not pay in full settlement of her debt of Rs. 5,000 is credited to the Equity account, reflecting a decrease in liability and an increase in her equity by Rs. 100.
Step-by-step explanation:
When Garima received Rs. 4,900 in full settlement of debt instead of Rs. 5,000, the missing Rs. 100 is considered a concession or discount given to her. In accounting terms, this means Garima has saved Rs. 100, which she was initially liable to pay. The accounting entry for this transaction would be a debit to the Debtor's (Accounts Receivable) account for Rs. 4,900, a credit to the Cash account for the same amount, and another credit to the Equity account for Rs. 100.
The posting of Rs. 100 as a credit to the Equity account effectively decreases Garima's liability, while also reducing her creditor's equity in the business by the same amount, reflecting a loss or expense due to the settlement discount. Using the reference information, if Frank had a scenario where he received a discount on his loan repayment, the savings would be reflected as an increase in his equity.