Bad Debt Recovery

Receipt of an amount, partially or in full, previously written off as uncollectible.

Account receivable previously written off as uncollectible is now collected. The entry is to reverse the original write-off by debiting accounts receivable and crediting allowance for bad debts. A second entry is required for the collection by debiting cash and crediting accounts receivable. A high ratio of recoveries to write-offs may signify to the analyst that the firm writes off uncollected debts too quickly. See also Allowance Method.