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
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