Understanding Bad Debt Recovery in Accountancy

The video tutorial explains the concept of bad debt recovery in accountancy. It begins with a basic question about journal entries for bad debt recovery, followed by a detailed explanation using an example. The tutorial then addresses common mistakes in journal entries and how to correct them. Finally, it discusses the effects of bad debt recovery on final accounts and the rectification of errors, emphasizing the importance of proper accounting practices.

What is the correct journal entry when a previously written-off debt is partially recovered?

• Cash/Bank Account Debit to Bad Debts Recovery Account

• Cash/Bank Account Debit to Sales Account

• Cash/Bank Account Debit to Bad Debts Account

• Cash/Bank Account Debit to Mohit Account

In the example provided, what was the initial sales entry for goods sold to Mohit?

• Sales Account Debit to Mohit Account

• Mohit Account Debit to Sales Account

• Sales Account Debit to Cash Account

• Cash Account Debit to Sales Account

Why is it incorrect to credit Mohit's account when recovering a bad debt?

• Because it would increase the company's liabilities

• Because it would make Mohit a creditor

• Because it would decrease the company's assets

• Because Mohit's account was never closed

What is the correct effect of bad debt recovery in the final accounts?

• Add to Debtors and Profit and Loss Account Credit Side

• Less from Debtors and Profit and Loss Account Debit Side

• Less from Debtors and Profit and Loss Account Credit Side

• Add to Debtors and Profit and Loss Account Debit Side

What is the first step in rectifying an error in accounting?

• Adjust the balance sheet

• Reverse the wrong entry

• Recalculate the profit and loss

• Pass the correct entry

What is the rectified entry when a bad debt recovery is wrongly posted to the Debtors account?

• Bad Debts Recovery Account Debit to Debtors Account

• Cash/Bank Account Debit to Debtors Account

• Debtors Account Debit to Cash/Bank Account

• Debtors Account Debit to Bad Debts Recovery Account

Why should bad debt recovery not affect the Debtors account?

• Because it is a gain and should be accounted separately

• Because it is a loss and should be written off

• Because it increases the liabilities

• Because it decreases the assets