Bad Debts Recovered Journal Entry

What is Bad Debts Recovery ?

Bad debts recovered refer to the amounts previously written off as bad debts that have been subsequently collected from customers.

It occurs when a customer, who was previously unable to pay their outstanding debt, makes a payment or settles their account at a later time.

When a company writes off a bad debt, it recognizes the loss and reduces the accounts receivable balance.

However, in some cases, customers may eventually make a payment towards their outstanding debt, either partially or in full. These payments are referred to as bad debts recovered.

Bad Debts Recovered Journal Entry

Bad Debts Recovered Journal Entry, the following journal entry is typically used:

Example #1

Here’s an example to illustrate the Bad Debts Recoevered Journal Entry:

Assume that Company XYZ previously wrote off a bad debt of $500 owed by a customer named XYZ Corp. However, XYZ Corp later makes a payment of $400 towards their outstanding debt.

Solution:

The journal entry to record the bad debt recovery would be as follows:

By recording this journal entry, the company reinstates a portion of the accounts receivable that was previously written off and recognizes the bad debt recovery as income in the income statement.

The accounts receivable balance will increase by the amount recovered, reflecting the collection from the customer.

Click here to learn how Bad Debts are recorded at first instance.

What is Bad Debts Recovery ?

Bad Debts Recovered Journal Entry

Example #1

1 thought on “Bad Debts Recovered Journal Entry”