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JAMB Principles of Accounts 1994 Question 21

Question 21

Bad Debts and Provisions

If a bad debt previously written off is subsequently repaid, the amount collected is recorded as an

  1. A.income in the profit and loss account
  2. B.income in the balance sheet
  3. C.additional cash in the profit and loss account
  4. D.expense in the balance sheet.
Show the answer and explanation

Answer: A (income in the profit and loss account)

Explanation

A bad debt recovered is a gain, so it is credited to the profit and loss account as income.