How should a company record the receipt of payment from a customer whose account balance was previously written off as uncollectible?

Question

Destinee · Answer

When a company writes off a customer's account balance as uncollectible, it means they recognize the debt as a bad debt expense. However, if the customer later sends payment for the written off amount, the company needs to record this as a bad debt recovery. In the case of Sheave Company, when the customer mails a payment of $350 after the account was written off, the company should follow these steps to record the receipt of payment:

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

Recording the Original Write-off:

Recording the Payment Receipt:

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