PRC-1 · Chapter 5 · Question 8 of 100
An irrecoverable debt of Rs. 5,000, which was formally written off two years ago, is unexpectedly paid by the customer via cheque. What is the correct double-entry to record this recovery?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Cash/Bank Rs. 5,000, Credit Bad Debts Expense (or Recovered) Rs. 5,000
Explanation
Because the customer's account was previously wiped to zero, the receipt of cash increases the bank balance (Debit Bank) and is recognized as income or a reduction of current expense (Credit Bad Debts Recovered/Expense).
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