Question

Received 10,000 in cash from Sohan for bad debts written off last year​

Answer 1

Answer:

Let’s start from the beginning.

Let’s assume you owe money from Paresh because you provided him services worth Rs. 1,000

So your accounting entry would be:

Accounts Receivable Debit 1,000

Income Credit 1,000

Now, Paresh, for private reasons, refuses to pay. In that case the accounting entry would be:

Bad Debts Expense Rs. 1,000 Debit

Allowance for bad debts Rs. 1,000 Credit

Allowance for Bad debt is a balance sheet item and will reduce accounts receivables.

After some time, Paresh is in now position to return your Rs. 1,000. In that case Bad Debt expense won’t be reversed. In fact, the accounting entry would be:

Allowance for Bad Debts Rs. 1,000 Debit

Accounts Receivables Rs. 1,000 Credit

Bad Debts expense, once introduced is not reversed. Instead allowance for bad debts is reversed.

I hope that answers the question

Answer 2

Answer:

cash a/c Dr 10000

To bad debt recovered a/c 10000