At the time of preparation of financial accounts, bad debt recovered account will be transferred to?

A. Debtors A/c
B. Profit & Loss A/c
C. Profit & Loss Adjustment A/c
D. Profit & Loss Appropriation A/c

Bad debt recovered is a windfall gain and it is transferred to Profit & Loss Account at the time of preparation of Final Accounts. If provisions account is there in the books it will be transferred to Provision A/c and the balance if any in the provision account will be transferred to Profit & Loss Account. It is recovery of bad debt written off and hence it is not transferred to Debtors Account. It is not transferred to Profit & Loss Adjustment Account. It is not an appropriation to be transferred to Profit & Loss Appropriation Account. Thus, the answer is B

Correct Answer: B. Profit & Loss A/c ✔

Last Updated: August 10, 2017