A debtor whose due of Rs 40,000 was written off as bad debts last year, paid Rs 30,000 in full settlement.why the entry is passed like
Bad debt Recovered A/c Dr
To Revaluation A/c
What is the rule behind it.
Because it is received.
Dear Student,
When some amount due becomes bad debt, "Bad debts ac" is debited. While writing offthe bad debts, bad debts are credited and profit and loss a/c is credited because there is a los due to bad debts.
Now, in the current year,since bad debts have already been written off, a new a/c called " Bad debts recovered " is created.
Now, this amount Rs 30,000 is the income related to the previous year, so it should be distributed among the old partners and not the new partners. Hence,it should be mentioned in the Revaluation a/c . It is an income, so Revaluation a/c is credited.
Hope you understand this!
Regards
When some amount due becomes bad debt, "Bad debts ac" is debited. While writing offthe bad debts, bad debts are credited and profit and loss a/c is credited because there is a los due to bad debts.
Now, in the current year,since bad debts have already been written off, a new a/c called " Bad debts recovered " is created.
Now, this amount Rs 30,000 is the income related to the previous year, so it should be distributed among the old partners and not the new partners. Hence,it should be mentioned in the Revaluation a/c . It is an income, so Revaluation a/c is credited.
Hope you understand this!
Regards