What entries should be made in the extended trial balance in respect of a bad debt subsequently recovered?
A) Debit the income statement and credit the asset account
B) Debit the income statement and debit the asset account
C) Credit the income statement and credit the asset account
D) Credit the income statement and debit the asset account

Question

Quizplus · Accepted Answer

When a bad debt is subsequently recovered, it is considered a gain for the company and should be credited to the income statement. However, since the bad debt was previously written off as a loss and reduced the value of the asset account, the asset account should be debited to reflect the increase in value due to the recovery. Therefore, the entry should be: Credit income statement, Debit asset account.

What Entries Should Be Made in the Extended Trial Balance