PRC-1 · Chapter 5 · Question 28 of 100
'Zephyr Trading' maintains a Receivables ledger. Customer 'Ali' owes Rs. 15,000, but has absconded, and the debt is formally written off. Six months later, Ali reappears and pays Rs. 15,000 cash. Does this payment re-open his receivables ledger balance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) No, the cash is simply debited to Bank and credited directly to Bad Debts Recovered/Expense.
Explanation
Once a debt is written off, the customer's account is zero. A subsequent unexpected recovery skips the receivables ledger entirely and is credited directly to profit/loss as Bad Debts Recovered (or credited against Bad Debt Expense).
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