Question

If bad debts once written off subsequently recovered, it will be shown

• A. Debit side of Profit and Loss account
• B. Credit side of Profit and Loss account
• C. Sundry debtors account
• D. Separately in balance sheet

Answer 1

Answer:

B. Credit side of Profit and Loss account

Bad debts are amounts owed by debtors that are written off as loss when considered irrecoverable. If a bad debt is later recovered, it becomes income for the business. Therefore, it is shown on the credit side of the Profit & Loss Account as “Bad Debts Recovered”. Other options: Debit side of P&L: Would indicate an expense, which is incorrect. Sundry Debtors Account: Only adjusts the debtor’s balance, not recorded as income in P&L. Separately in Balance Sheet: Not shown separately; it affects profit.