Accounts receivable is part of the current assets section of the balance sheet. It represents the total amount due from customers. If the company decides that a specific amount is an uncollectible bad debt, it writes off the amount and reduces the accounts receivable asset. If in a later period the customer pays all or part of the outstanding debt, the company must reverse the original write-off before recording the receipt.
Check the original journal entry for the write-off to ensure that the full amount of the debt was written off to the bad debts account. For example, in an earlier period the company wrote off a debt of $1,500 by debiting the bad debts expense account and crediting accounts receivable.
Reverse the original write-off by crediting the bad debts expense account and debiting accounts receivable with the amount received. For example, the customer pays the debt of $1,500 in full. Reverse the original entry by crediting the bad debts expense account and debiting accounts receivable with $1,500.
Record the customer's receipt by debiting the bank account and crediting accounts receivable. In this example, debit the bank account and credit accounts receivable with $1,500.
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