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how does the Reversal of write-off of accounts receivables affect the income statement/ Balance sheet by...

how does the Reversal of write-off of accounts receivables affect the income statement/ Balance sheet by using the percentage sales method?

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Answer #1

In case the customer pays the debt which was already written-off, we should reverse the journal entry passed at the time of written off.

1. Journal entry for bad debt written off,

Debit: Allowance for doubtful debt

Credit : Accounts Receivable

2. Journal entries for reversal;

a. Debit : Accounts Receivable

Credit : Allowance for Doubtful Debt

b. Debit : Cash

Credit : Accounts Receivable

Therefore, Reversal of write-off of accounts receivable will affet the balance sheet by re-stating cash and accounts receivable under percentage sales method.

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