Accounting Mcqs

Q.  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


ANSWER: See Answer
 
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
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