PRC-1 · Chapter 8 · Question 38 of 100
A recovery of a previously written-off bad debt of Rs. 1,500 was correctly recorded in the cash book but credited to the customer's personal account. What is the correcting journal entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Customer Rs. 1,500, Credit Bad Debt Recovery Rs. 1,500
Explanation
Bad debt recoveries should be credited to an income account, not the customer's account (which was previously closed). The correction debits the customer to clear the false credit and credits Bad Debt Recovery.
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