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Hi there
I’m using the Kaplan revision kit and notice that on the receivables control account example template there’s an irrecoverable debt recovered heading on the debit side?
Could you explain under what circumstances this might be as I believed these were posted to irrecoverable debts as a credit?
When cash is received from an irrecoverable debt, then the correct entry is to debit cash and credit irrecoverable debts expense account.
Without seeing the actual Kaplan question, I would imagine that the question says that when the cash was received then the bookkeeper had (wrongly) debited cash and credited receivables (which is a common mistake in real life, because that it obviously what they normally do when they receive money from a debtor).
So to correct the mistake, we need to debit receivables (to cancel out the credit that should not be there) and credit irrecoverable debts (because that is where the entry should have been).
If you watch my free lectures on irrecoverable and doubtful debts, then exactly the same problem occurs within the third example that I work through.
(The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.)
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