The following general journal entry was recorded. What transaction does it represent?
Question 1 Report
The following general journal entry was recorded. What transaction does it represent?
Answer Details
The correct answer is: receiving payment from a customer whose debt was previously written off.
The journal entry shows Bank debited (money received) and Irrecoverable debts recovered credited (income recognised). This records cash received for a debt that had previously been written off as irrecoverable. When a debt is recovered after being written off, the amount received is credited to an irrecoverable debts recovered account (which is income) and debited to the bank account.
Writing off a debt would debit irrecoverable debts expense and credit trade receivables. Allowing a cash discount would involve a discount allowed account. Receiving payment for a current credit sale would credit trade receivables, not irrecoverable debts recovered.
Download The App On Google Playstore
Everything you need to excel in your exams
