Bad Debts Recovery | Accounting | NTA UGC NET Paper 2

Bad Debts Recovery

As states earlier, when the seller mentions any loss due to bad debt, it is written off by debiting account of Bad Debt and crediting the account of Sundry Debtors. Sometimes the debts determined as bad debts and are not likely to receive is received, such bad debt realised is known as Bad Debt Recovered. Such an amount of debts realised is to be credited to Bad Debts Recovery Account. It is transferred to Profit & Loss Account in the year in which the same is recovered.

Thus following entries should be passed for the purpose:

(i) For recovering Bad Debts –
Cash / Bank A/c Dr.
(With the amount of bad debt recovery)
To Bad Debts Recovery A/c
(ii) For transferring to Profit & Loss Account –
Bad Debts Recovery A/c Dr.
To Profit &Loss A/c