Bad debt recovered of Rs. 2000 which were previously written off as ba...
Answer:
Explanation:
When bad debts are written off, it means that the company has determined that it is highly unlikely to recover the amount owed by a specific debtor. The amount of bad debt is then removed from the debtor's account and recorded as an expense in the books of accounts. However, there is still a possibility that the company may recover some or all of the bad debt in the future.
In this case, the bad debt of Rs. 2000, which was previously written off, has been recovered. The recovery of bad debt is treated as a separate transaction and needs to be recorded in the books of accounts. The recovery amount of Rs. 2000 should be credited to the Bad Debt Recovered Account.
Reasoning:
The Bad Debt Recovered Account is a nominal account used to record the recovery of previously written off bad debts. It is a contra account to the Bad Debt Account, which is used to record the write-off of bad debts as an expense. By crediting the Bad Debt Recovered Account, we are reducing the balance of this account, as it represents a recovery rather than an expense.
The other options mentioned:
a) Bad Debt Account: This account is used to record the write-off of bad debts as an expense. It is not appropriate to credit this account when a bad debt is recovered, as it would increase the expense and not reflect the recovery.
b) Debtor Account: The debtor account represents the amount owed by a specific debtor. Crediting this account is not appropriate when a bad debt is recovered, as it would increase the debtor's balance and not reflect the recovery.
d) Suspense Account: The suspense account is used to temporarily record transactions with unclear or incomplete information. It is not appropriate to credit this account when a bad debt is recovered, as it does not reflect the specific nature of the transaction.
Therefore, the correct option is c) Bad Debt Recovered Account, as it accurately reflects the recovery of the previously written off bad debt.
Bad debt recovered of Rs. 2000 which were previously written off as ba...
Adjustment entry
Debtor a/c dr. 2,000
To Bad debt recovered a/c cr. 2,000