PRC-1 · Chapter 10 · Question 30 of 100
A business recovers a bad debt of Rs. 5,000 that was written off in the previous accounting year. How is this recovery reported in the current year's financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) As a deduction from the current year's bad debt expense or as Other Income.
Explanation
Bad debts recovered represent an unexpected inflow of economic benefit related to a previously recognized loss. It is treated as 'Other Income' or a credit against bad debt expense.
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