Question

A bad debt recovered during the year is a __________.

• A. capital expenditure
• B. revenue expenditure
• C. capital receipt or gain
• D. revenue receipt

Answer 1

The correct option is D revenue receipt

Bad debt is an amount which is not recoverable from the customers to whom goods are sold on credit. Its an indirect loss to the firm and is debited to profit and loss account by crediting the respective ledger account of sundry debtors.

Later on, if the bad debts are recovered, it has to be credited to profit & loss account as revenue receipt.