Question

At the time of preparation of financial accounts, bad debts recovered account will be transferred to______________.

• A. Debtors A/c
• B. Profit and Loss A/c
• C. Profit and Loss Adjustment A/c
• D. Profit and Loss Appropriation A/c

Answer 1

The correct option is B Profit and Loss A/c

At times. a debtor whose account had earlier been written off as bad debts may decide to make the payments.

This is called Bad debts recovered. While journalizing for bad debts, Debtor's personal account is credited and bad debts account is debited because bad debts are treated as loss to the firm and now when they are recovered it is seen as a gain to the business. So, they are transferred to Profit and Loss Account.