Bad Debt Recovery: How to Record Payment from a Previously Written Off Customer

Recording the Original Write-off:

1. Debit: June 12 - Allowance for Doubtful Debts - $350

Credit: June 12 - Accounts Receivables Account - $350

Recording the Payment Receipt:

Step 1: Reverse the original write-off:

Debit: Nov 3 - Accounts Receivables Account - $350

Credit: Nov 3 - Allowance for Doubtful Debts - $350

Step 2: Record the Cash Receipt:

Debit: Nov 3 - Cash - $350

Credit: Nov 3 - Accounts Receivables Account - $350

By following these steps, Sheave Company will properly account for the payment from the customer and adjust their financial records accordingly. This process ensures transparency and accuracy in financial reporting.

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