Received from Krishna Murthy for final settlement the Entry
has to be followed

Cash A/C   Dr  26500/-
Discount allowed A/C Dr 3500/-
        To   Krishna Murthy A/C 30000/-

Being full and final settelment of the Murhty A.C

cash A/c Dr               30000
    To Krishna Murth A/C         26500
    To Discount A/c              3500

  ( Being Cash recived from Krishna Murth )

Cash/ Bank A/c            Dr.         26500.00
Discount A/c              Dr.          3500.00
     To Krishna Murthy                              30000.00

RECEIPT ENTRY

 CASH/BANK A/C DR  26500/-
 DISCOUNT  A/C DR   3500/-

  TO kRISHNA MURTHY      30000/-

(BEING AMOUNT RECEIVED FROM 26500/-)

Cash account    26500 Dr
Bad debts        3500 Dr

to Krishna murthy          30000 Cr

(Being Cash received from Krishna mutrthy of rs 26500 for 
full and final settlement so diff amount is doutful we are 
treated as bad debts)