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Zorluk: ZorBad Debts Written Off and Bad Debts Recovered

Ade & Sons Enterprises extracted a trial balance at 31 December 2025 showing a Trade Debtors balance of ₦520,000\text{₦}520,000. At year-end, additional bad debts of ₦32,000\text{₦}32,000 were identified to be written off. Furthermore, a customer whose debt of ₦18,000\text{₦}18,000 was written off in 2024 paid the full amount during the year; the cash received was correctly entered in the cash book but incorrectly credited directly to the Trade Debtors control account instead of the Bad Debts Recovered account. What is the corrected Trade Debtors balance to be shown in the Statement of Financial Position at 31 December 2025?

  1. ₦506,000\text{₦}506,000Cevap
  2. B
    ₦488,000\text{₦}488,000
  3. C
    ₦470,000\text{₦}470,000
  4. D
    ₦538,000\text{₦}538,000

Cevap

The correct Trade Debtors balance to be presented in the Statement of Financial Position is ₦506,000\text{₦}506,000.
When a bad debt previously written off is recovered, the double entry is to debit Cash/Bank and credit Bad Debts Recovered Account. Crediting Trade Debtors in error understated the account balance by ₦18,000\text{₦}18,000. To rectify this, ₦18,000\text{₦}18,000 must be debited back to Trade Debtors, raising the balance from ₦520,000\text{₦}520,000 to ₦538,000\text{₦}538,000. Deducting the ₦32,000\text{₦}32,000 current year bad debt write-off yields a net Trade Debtors balance of ₦506,000\text{₦}506,000.

Adım Adım Çözüm

1
Identify the trial balance Trade Debtors figure
Unadjusted Trade Debtors = ₦520,000\text{₦}520,000.
This is the starting ledger balance extracted before year-end adjustments.
2
Correct the error regarding bad debt recovered
Adjusted Trade Debtors before write-off = ₦520,000+₦18,000=₦538,000\text{₦}520,000 + \text{₦}18,000 = \text{₦}538,000.
Crediting ₦18,000\text{₦}18,000 directly to Trade Debtors was an error because recovery of previously written-off debts must be credited to Bad Debts Recovered Account. Reversing the erroneous credit requires debiting Trade Debtors by ₦18,000\text{₦}18,000.
3
Deduct new bad debts written off
Final Net Trade Debtors = ₦538,000−₦32,000=₦506,000\text{₦}538,000 - \text{₦}32,000 = \text{₦}506,000.
Bad debts written off in the current year reduce the total recoverable amount from debtors.

Anahtar Kavram

Accounting treatment of bad debts written off and bad debts recovered
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Konular

Bad Debts Written Off and Bad Debts Recovered

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