Recovery of amounts previously written off


Recovery of amounts previously written off

When amounts previously written off are recovered profits previously decreased should be reversed. Receipts from bad debt recovered are ordinarily treated as income not arising from main operations of a business, also known as other income.

The recording of recovered amounts should normally be preceded by reinstatement in the debtor’s account of the balance previously written off. This is preferred because it allows a historical note in the customer’s account which would otherwise be unrecorded, if a direct entry to other income and cash was made.

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