CA Foundation Exam > CA Foundation Questions > A bad debt recovered during the year.a)Capita...
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A bad debt recovered during the year.
- a)Capital expenditures
- b)Revenue expenditures
- c)Capital receipt
- d)Revenue receipt
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
A bad debt recovered during the year.a)Capital expendituresb)Revenue e...
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.
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A bad debt recovered during the year.a)Capital expendituresb)Revenue e...
Bad debt recovered during the year is a revenue receipt. Let's understand why:
Revenue Receipts:
Revenue receipts are the receipts of the government that do not create any liability or reduce any asset. They are the receipts from the normal activities of the government, not from any capital source. These receipts are used to meet the everyday expenses of the government.
Bad Debt Recovery:
A bad debt is an amount that is owed by a debtor but is not expected to be paid. When a bad debt is written off, it is considered as a loss to the business. However, if the debtor pays the amount later, it is considered as a recovery of bad debt. This amount is then considered as a revenue receipt.
Conclusion:
As bad debt recovered is not a capital receipt, it cannot be classified as capital expenditure or capital receipt. As it is a revenue receipt, it cannot be classified as revenue expenditure. Therefore, the correct answer is option 'D' - Revenue receipt.
Revenue Receipts:
Revenue receipts are the receipts of the government that do not create any liability or reduce any asset. They are the receipts from the normal activities of the government, not from any capital source. These receipts are used to meet the everyday expenses of the government.
Bad Debt Recovery:
A bad debt is an amount that is owed by a debtor but is not expected to be paid. When a bad debt is written off, it is considered as a loss to the business. However, if the debtor pays the amount later, it is considered as a recovery of bad debt. This amount is then considered as a revenue receipt.
Conclusion:
As bad debt recovered is not a capital receipt, it cannot be classified as capital expenditure or capital receipt. As it is a revenue receipt, it cannot be classified as revenue expenditure. Therefore, the correct answer is option 'D' - Revenue receipt.
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A bad debt recovered during the year.a)Capital expendituresb)Revenue expendituresc)Capital receiptd)Revenue receiptCorrect answer is option 'D'. Can you explain this answer?
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A bad debt recovered during the year.a)Capital expendituresb)Revenue expendituresc)Capital receiptd)Revenue receiptCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A bad debt recovered during the year.a)Capital expendituresb)Revenue expendituresc)Capital receiptd)Revenue receiptCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A bad debt recovered during the year.a)Capital expendituresb)Revenue expendituresc)Capital receiptd)Revenue receiptCorrect answer is option 'D'. Can you explain this answer?.
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