What is bad debt and what is the journal entry for bad debt recovery?

Question

Accepted Answer

Bad debt is an amount owed by a debtor that is unlikely to be paid. Bad debt recovery entry is the process of recovering the amount owed.

Bad debt is a loss for the company and is written off as an expense
Bad debt recovery entry is made when the amount is recovered
The entry is made by debiting the cash account and crediting the bad debt recovery account
Example: If a customer owes $1000 and is unable to pay, it becomes bad debt. If later the customer pays $500, the bad debt recovery entry will be a debit of $500 to cash account and a credit of $500 to bad debt recovery account

Accepted Answer

Debit bad debts account and credit debtors account. For recovery reverse the original entry

Accepted Answer

Bank A/c Dr

To Bad Debt Recovery A/c (Income )

Bank Debt Recovery A/c Dr (Income)

To Bad Debt A/c (Loss)

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