Question

In august, Johns Co.’s account receivable balance was written off using the direct method. In November, Johns pays the balance is full. The Journal entry to record the reinstatement of the account receivable must include a credit to the ________ account before recording a debit to the Cash account.

Answer 1

Answer: Bad debts Expense

Explanation: Bad Debts Expenses occur when qccount receivable has been written off initially and may be recovered in full or in part.

For the journal entry, the accounting treatment of recovered amount will require two journal entries with the first entry being made to reinstate the recovered account , and the second one being made to record the receipt of cash from that receivable..

Therefore, when a previously written off account is recovered and the cash is received from the related receivable, the Journal entry to record the reinstatement of the account receivable must include a credit to the Bad debts Expense account before recording a debit to the Cash account.