Bad Debts Recovered
Some times, it so occurs that the bad debts formerly written off are consequently recovered. In such case, the cash account is debited and bad debts recovered account is credited because the amount so received is an increase in the business. These recoveries can regularly actually produce income because it will normally produce a loss when it is written off by the lender.
A debt incurred from a loan, a credit line, or accounts receivable that is recovered either in whole or in the division after it had been written off or classified by the lender as a bad debt. This recovery can regularly actually generate income because it will typically generate a loss when it is written off by the lender.
Example: Received cash for a Bad debt written off last year Rs.7,500 on 18th January 2004.