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A bad debt recovered during the year is... a)capital receipt b)revenue receipt c)revenue expenditure d)capital receipts

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Question added by manaf almas , Auditor , DAR AL NUZUM PUBLIC ACCOUNTANTS
Date Posted: 2014/10/24
Abdul Qayyum Mohammed
by Abdul Qayyum Mohammed , Sales And Marketing Manager , Zafar Naji Al-Muthlaq Contracting Establishment

Under the allowance method, if a specific customer's accounts receivable is identified as uncollectible, it is written off by removing the amount from Accounts Receivable. The entry to write off a bad account affects only balance sheet accounts:

1)  Debit - Allowance for Doubtful Accounts.

     Credit - Accounts Receivable.

 

After a seller has written off an accounts receivable, it is possible that the seller is paid part or all of the account balance that was written off. Under the allowance method, if such a payment is received (whether directly from the customer or as a result of a court action) the seller will take the following two steps:

A)  Debit - Accounts Receivable.

     Credit - Allowance for Doubtful Accounts.

 

B)  Debit - Cash or Bank

     Credit - Accounts Receivable

 

Therefore, The receipt is called as Revenue Receipt.

Saleem Khatri
by Saleem Khatri , Head of Finance , Berger Paints International

b - revenue receipt

mohamed Hakim CMA CPA Candidate
by mohamed Hakim CMA CPA Candidate , Accounting Manager , Andersen saudi arabia

Answer : b 

Deleted user
by Deleted user

Bad debt recovered during year is a Revenue Receipt

Saif ullah
by Saif ullah , Manager Accounts And Finance , Pakitex Board Pvt Ltd

B is the right answer and Mr. Abdul Qayyum has explained it very well

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