Kalu Enterprises received cash of from a customer whose account was previously written off as a bad debt in the preceding financial year. Complete the statement below regarding the double-entry bookkeeping procedure required to reinstate the customer's account before recording the cash receipt.
Answer:To reinstate the customer's account, the bookkeeper must debit the 【Trade Debtors】 account and credit the 【Bad Debts Recovered】 account.
Answer
To reinstate the customer's account prior to recording cash collection, the Trade Debtors (or Personal) account is debited and the Bad Debts Recovered account is credited.
When a debt previously written off is recovered, proper double-entry accounting mandates a two-stage process. First, the debtor's account is reinstated by debiting the Trade Debtors (or customer's personal) account and crediting the Bad Debts Recovered account. Second, the cash receipt is recorded by debiting Cash/Bank and crediting Trade Debtors.
Step-by-Step Solution
Key Concept
Bookkeeping entries for bad debts recovered
Estimated Time:1m 30s