Sonny's Service Bureau is able to collect an amount previously written off last year under the direct write-off method. The journal entry will:
A) decrease Bad Debts Expense.
B) increase Bad Debts Recovered.
C) decrease Accounts Receivable.
D) decrease Cash.

Question

Quizplus · Accepted Answer

When a company collects on an account previously written off under the direct write-off method, it typically records the recovery by increasing (debiting) Cash and increasing (crediting) a Bad Debts Recovered account (or directly crediting Bad Debts Expense, depending on the company's accounting policy). This entry does not decrease Accounts Receivable because the account was already written off, nor does it decrease Cash.

Sonny's Service Bureau Is Able to Collect an Amount Previously