Question

OKAY:

June 30: Recovery of a previously written off account receivable

Today, an agent from George's Home Showroom remitted a check for the account which was previously written off (June 2). Examine the subsidiary ledger for A/R to find the sales invoice number (V4380) and the amount (300.00) of the write off. Reestablish the account for George's Home Showroom and the receipt of the check. TWO entries are required.

My question is, I have a couple accounts that I could use. I could use Bad Debts Expense, Allowance for Doubtful Accounts... I'm not sure what to use. I'm also not sure what to debit and what to credit. Please help! Thank you.

Answer 1

• The issue here is that amount is being received from an account receivable that was previously written off.
• Under Allowance method, when accounts receivables are written off, following entry is recorded:

Accounts title	Debit	Credit
Allowance for Doubtful Accounts	XXX
Accounts receivables		XXX

• Now, the question says that $ 300 of amount that was previously written off, is now being received.
• This require two entries:

#1 to reinstate the accounts receivables written off,

#2 to record receipt of Cash

• #1 To reinstate the written off accounts receivables, the above entry is reversed.
• #2 to record cash receipt, Cash is debited, and accounts receivables is credited.
• ANSWER: Hence, the two entries that you should record are:

Accounts title	Debit	Credit
Accounts receivables	$                            300
Allowance for Doubtful Accounts		$                300
(written off account re instated)
Cash	$                            300
Accounts receivables		$                300
(Cash received)