Question

Gopal and Govind are partners in a firm sharing profits equally. They admitted Chetan for a `1/3`rd share in profits. On admission debtor whose dues of ₹ 5,000 were earlier written off as bad-debts, paid ₹ 4,000 in full settlement. Bad debts recovered ₹ 4,000 will be debited to ______ and credited to ______.

विकल्प

• Cash/Bank A/c, Revaluation A/c

• Bad debts recovered A/c, Bad debts A/c

• Cash/Bank A/c, Bad debts A/c

• Revaluation A/c, Bad debts recovered A/c

Answer 1

Gopal and Govind are partners in a firm sharing profits equally. They admitted Chetan for a `1/3`rd share in profits. On admission debtor whose dues of ₹ 5,000 were earlier written off as bad-debts, paid ₹ 4,000 in full settlement. Bad debts recovered of ₹ 4,000 will be debited to Cash/Bank A/c and credited to Revaluation A/c.

Explanation:

At the time of Chetan’s admission, the firm was undergoing reconstitution. The recovery of bad debts is an unexpected gain or the realization of an unrecorded asset, which is routed through the Revaluation Account. Since the firm received cash, the Cash or Bank Account is debited (Rule of Real Accounts: Debit what comes in). This gain is credited to the Revaluation Account because all profits and losses at the time of reconstitution are transferred to this account.