ACCA FA · Chapter 7 · Question 8 of 12
A debt of $800 that was written off as irrecoverable in a previous year is unexpectedly received in full during the current year. What is the overall double entry to record the receipt?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Cash $800; Credit Irrecoverable debts expense $800
Explanation
The debt was removed from receivables when it was written off, so it is no longer in the receivables ledger. One approach reinstates it (Dr Receivables, Cr Irrecoverable debts expense) and then records the cash (Dr Cash, Cr Receivables). The net effect is Dr Cash $800, Cr Irrecoverable debts expense $800, which reduces the expense or shows as a recovery. Crediting receivables alone would leave a credit balance on an account that was already cleared, and the receipt is not new revenue because the sale was recognised previously.
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