At the time of retirement, if bad debts which were written off previously are now recovered, then where it is shown at the time of revaluation of assets?
Answer & explanation
Correct answer: option 1
The correct answer is option 1: Credit side of revaluation account
Recovery of bad debts represents a gain for the firm, because an amount that was earlier treated as a loss is now received.
In revaluation:
- Gains are recorded on the credit side
- Losses are recorded on the debit side
Hence, recovered bad debts are treated as a profit on revaluation and shown on the credit side of the Revaluation Account.