Final answer:
If an Accounts Receivable (A/R) that was previously written off is subsequently collected, it needs to be reversed and recognized as income.
Step-by-step explanation:
When an Accounts Receivable (A/R) is written off, it means that the company has determined that it is unlikely to collect the outstanding amount. However, if the company subsequently collects the amount that was written off, it needs to reverse the initial write-off entry and recognize the payment as income.
For example, let's say a company wrote off a $1,000 A/R from a customer. Later on, the customer pays the outstanding amount of $1,000. In this case, the company will reverse the write-off entry by reducing the bad debt expense and increasing the accounts receivable. The payment will then be recorded as income.