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Can you explain the answer of this question below:
Recovery of bad debts written off previously will be ?
- A:Credited to debtors A/c
- B:Adjusted against provision for doubtful debts
- C:Debited to debtors A/c
- D:Credited to Profit and Loss A/c
The answer is d.
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Can you explain the answer of this question below:Recovery of bad debt...
Recovery of bad debts written off previously will be credited to Profit and Loss A/c. This can be explained in the following points:
1. Bad debts: When a debtor fails to pay the outstanding dues, it is considered as bad debt. The company writes off such bad debts from its books of accounts as they are considered as irrecoverable.
2. Provision for doubtful debts: To account for the possibility of bad debts, companies create a provision for doubtful debts. This provision is created by estimating the amount of bad debts that are likely to occur in the future.
3. Recovery of bad debts: Sometimes, a debtor who has been written off as bad debt pays the outstanding dues. This is considered as the recovery of bad debts.
4. Accounting treatment: The recovery of bad debts is credited to Profit and Loss A/c because it is a gain for the company. The bad debt was written off in the past, which means that the company had already accounted for the loss. Therefore, the recovery of bad debts is considered as a gain for the company, and it is credited to the Profit and Loss A/c.
5. Impact on provision for doubtful debts: The recovery of bad debts does not impact the provision for doubtful debts. This is because the provision was created based on an estimate of bad debts that are yet to occur. The recovery of bad debts is an unexpected event, and it does not change the estimate of future bad debts.
In conclusion, the recovery of bad debts written off previously will be credited to Profit and Loss A/c because it is a gain for the company. It does not impact the provision for doubtful debts as it is an unexpected event.
1. Bad debts: When a debtor fails to pay the outstanding dues, it is considered as bad debt. The company writes off such bad debts from its books of accounts as they are considered as irrecoverable.
2. Provision for doubtful debts: To account for the possibility of bad debts, companies create a provision for doubtful debts. This provision is created by estimating the amount of bad debts that are likely to occur in the future.
3. Recovery of bad debts: Sometimes, a debtor who has been written off as bad debt pays the outstanding dues. This is considered as the recovery of bad debts.
4. Accounting treatment: The recovery of bad debts is credited to Profit and Loss A/c because it is a gain for the company. The bad debt was written off in the past, which means that the company had already accounted for the loss. Therefore, the recovery of bad debts is considered as a gain for the company, and it is credited to the Profit and Loss A/c.
5. Impact on provision for doubtful debts: The recovery of bad debts does not impact the provision for doubtful debts. This is because the provision was created based on an estimate of bad debts that are yet to occur. The recovery of bad debts is an unexpected event, and it does not change the estimate of future bad debts.
In conclusion, the recovery of bad debts written off previously will be credited to Profit and Loss A/c because it is a gain for the company. It does not impact the provision for doubtful debts as it is an unexpected event.
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Community Answer
Can you explain the answer of this question below:Recovery of bad debt...
When bad debts are recovered the entry is
bank a/c....Dr
To baddebts w/o recovered a/c
baddebts w/o recovered a/c ...Dr
To p&l a/c
here baddebts w/o recovered will be in the subsequent periods
so reducing debtors of current period by receiving amount from debtors of previous period whose accounts are not in existence is not correct.
as baddebts are considered as loss in previous period and it is now recovered it should be considered as income
bank a/c....Dr
To baddebts w/o recovered a/c
baddebts w/o recovered a/c ...Dr
To p&l a/c
here baddebts w/o recovered will be in the subsequent periods
so reducing debtors of current period by receiving amount from debtors of previous period whose accounts are not in existence is not correct.
as baddebts are considered as loss in previous period and it is now recovered it should be considered as income
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Can you explain the answer of this question below:Recovery of bad debts written off previously will be ?A:Credited to debtors A/cB:Adjusted against provision for doubtful debtsC:Debited to debtors A/cD:Credited to Profit and Loss A/cThe answer is d.
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Can you explain the answer of this question below:Recovery of bad debts written off previously will be ?A:Credited to debtors A/cB:Adjusted against provision for doubtful debtsC:Debited to debtors A/cD:Credited to Profit and Loss A/cThe answer is d. for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Can you explain the answer of this question below:Recovery of bad debts written off previously will be ?A:Credited to debtors A/cB:Adjusted against provision for doubtful debtsC:Debited to debtors A/cD:Credited to Profit and Loss A/cThe answer is d. covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Can you explain the answer of this question below:Recovery of bad debts written off previously will be ?A:Credited to debtors A/cB:Adjusted against provision for doubtful debtsC:Debited to debtors A/cD:Credited to Profit and Loss A/cThe answer is d..
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