How to Reverse an Accounts Receivable Written-off as Bad Debts Expense Account

CASE SCENARIO:

1. A customer never paid the Invoice for $1,000. Wrote-off as bad debt expense account.
2. Later paid $1,000.

You will first need to check to the original entry to see how the debt was written off to the bad debts expense account. For example, wrote a journal to wrote off a debt of $1,000 by debiting the bad debts expense account and crediting account receivable account.

To make this simple, you will need to reverse what you did. This will typically be a two-step process in order to record the recovery of bad debt payment.

1. Reverse the original entry (Journal Entry) by crediting the bad debts expense account and debiting accounts receivable account with $1,000.
2. Record the customer’s receipt by debiting the bank account and crediting accounts receivable account. In this example, debit the bank account and credit accounts receivable account with $1,000.