Question

What accounts are involved in the recovery and subsequent cash collection entry?

a.Accounts Receivable and Cash
b.Allowance for Doubtful Accounts and Bad Debt Expense
c.Bad Debt Expense and Accounts Receivable
d.Allowance for Doubtful Accounts and Cash

Answer 1

The recovery and subsequent cash collection entry involves Bad Debt Expense and Accounts Receivable.

Step-by-step explanation:

The correct answer is c. Bad Debt Expense and Accounts Receivable.

When a company is not able to collect payment from a customer, it needs to write off the amount as a bad debt expense. This reduces the value of the accounts receivable. Once the company is able to recover some or all of the payment, it will record the recovery and subsequent cash collection entry by crediting the Accounts Receivable account and debiting the Cash account.