Journal Entry for
Recovery of Bad Debts?

Q: What is the double entry of recording recovery of bad debts in control accounts?

First of all, bad debts are debts owed to the business that have gone bad. In other words, you don't think Joe Shmoe is going to pay you the $1,000 he owes you as he just declared bankruptcy or something like that.

When this situation occurs you record this debt that won't be paid as a loss, and we call this bad debts:

Dr Bad Debts $1,000
Cr Debtors Control $1,000

Note that the credit here is for the debtors account. What this means is that our debtors are less, which makes sense as we are not expecting as much money to be received in future anymore.

Bad Debts RecoveredNow let's say that 2 years later Joe Shmoe's new business is doing well and he has money again and he is forced to pay you some of the money he owed you before (let's say $600). The money he pays you is now recorded as an income and we use the term bad debts recovered.

Here's the journal entry:

Dr Bank $600
Cr Bad debts recovered (income) $600

As you can see, the entry above actually does not affect the debtors control account at all. It is simply a simple recording of income and cash in one entry.

Hope that makes sense!

FYI I don't provide full lessons, examples and exercises regarding bad debts (and provision for bad debts) on this site. This is only available in my basic accounting books.


Comments for Journal Entry for
Recovery of Bad Debts?

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Bad debts Recovery By cash
by: Md. Nasim Uddin

Cash----- dr.
Bad debts Recovery ----cr.

Bad debts Recovery----- dr
Income statement --------cr.

Bad debt recovered
by: Arshia Pervaiz

Which method should we use if there is bad debts recovered? Plz tell me about this. Can we use direct write off method or allowance method use for recovering of bad debts?

Double entry for bad debts
by: Anonymous

debit bad debts and credit debtors control.

Journal Entry
by: Gbotemi

1. if the details specific bad debt recovery is known:- dr the debtor (s) account and cr bad debt account, with the same amount.
then: dr cash/bank for amount recovered and cr debtors account.

2. if the details are not known.
dr cash/bank and cr bad debts account for the same amount.

provision for doubt debt
by: Anonymous

What are the journal entries of provision for doubtful debts if the past year's bad debt written off is being paid back? How do we adjust provision of doubtful debts?

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