Treatment of Recovery of bad debts in Company Balance sheet

Question

Accepted Answer

Recovery of bad debts is recorded as a reduction in the accounts receivable and an increase in the cash or bank balance.

Recovery of bad debts is a financial transaction that occurs when a previously written-off debt is collected.
The recovery is recorded as a reduction in the accounts receivable balance on the balance sheet.
Simultaneously, the cash or bank balance is increased by the amount of the recovery.
The recovery is typically recorded as a separate line item in the balance sheet under the current assets section.
For example, if a company had previously written off a bad debt of $1,000 and later recovers $500, the accounts receivable balance would be reduced by $500 and the cash or bank balance would be increased by $500.

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