When a firm using the allowance method of estimating bad debts expense recovers the amount of an account receivable previously written off, the recovery will increase Cash and increase Miscellaneous Income.

Question

Quizplus · Accepted Answer

The recovery will indeed increase Cash, but it will not increase Miscellaneous Income. Instead, the recovery will reverse the previous write-off by debiting Accounts Receivable and crediting Allowance for Doubtful Accounts, and then Cash is debited and Accounts Receivable is credited to reflect the actual cash receipt.

When a Firm Using the Allowance Method of Estimating Bad