Question

What is the normal procedure for handling the collection of accounts receivable previously written off using the direct write-off method? The allowance method?

Short answer

The direct write-off method does require a single journal entry, but under the allowance method,two journal entries are made one is for re-establishment of balance, and another is for receipt.

Step-by-step solution

Definition of Revenue

Revenue can be defined as the inflow of benefits in the organization occurring because of services and products provided to the customer.

Normal Procedure of Recording the Recovery of Bad Debts

1. Direct write of method: Under the direct write-off method, revenue account is credited by the business entity, and the following journal entry is made:

Date	Accounts and Explanation	Debit $	Credit $
xx-xx-xx	Cash	xxx
	Bad debts recovered		xxx

2. Allowance method: Under the allowance method, the balance in accounts receivable is re-established, and then the receipt entry is made:

Date	Accounts and Explanation	Debit $	Credit $
xx-xx-xx	Accounts receivables	xxx
	Allowance for doubtful accounts		xxx
xx-xx-xx	Cash	xxx
	Accounts receivables – Customer account		xxx