Header Ads

Clear the Doubt of Journal Entry on Recovering Bad Debt

Dear Sir, there is one big doubt... you said that when account receivable,which is written off and after some time its recovered, in such situation.... as per you entry.... > cash/bank dr to a/c receivable as per my opinion.... > Cash/bank dr  to bad debts.

Ankit from India

Ankit! I am trying to clear your doubt.

1. When our debtor did not pay our money on the time. We have convert his debt in to bad debt by passing following entry.

Bad Debt Account Debit XXXX

Debtor Account Credit XXXX

2. This is our business loss and it has been transferred to our profit and loss account

Profit and loss account Debit XXXX

Bad Debt Account Credit XXXX

3. Now, bad debt account has closed, so when same debtor will pay his old bad debts, it will not be credited with bad debts because we already credited bad debts by transferring to profit and loss account, we have to transfer bad debt recovered account which is the part our earning and transferred to profit and loss account

Bank account Debit XXXX

Bad Debt Recovered Account Credit XXXX

and then we will transfer it to profit and loss account

Bad debt recovered account Debit XXXX

Profit and loss account Credit XXXX

No comments

Powered by Blogger.