Let’s walk through the accounting entries for the bad debt recovery in the years 20X6 and 20X7:

1. Year 20X6:

   • In 20X6, Mr. Aslam wrote off the bad debt (Rs. 30,000/-) as it seemed uncollectible. This means he removed it from the accounts receivable.
   • The journal entry to write off the bad debt:
     • Debit: Bad Debts (Expense) Account (Rs. 30,000/-)
     • Credit: Accounts Receivable (Mr. Usman) Account (Rs. 30,000/-)

2. Year 20X7:

   • Unexpectedly, Mr. Aslam received the entire amount of Rs. 30,000/- from Mr. Usman. This is a recovery of the previously written-off bad debt.
   • The journal entry for the bad debt recovery:
     • Debit: Cash Account (Rs. 30,000/-)
     • Credit: Accounts Receivable (Mr. Usman) Account (Rs. 30,000/-)

The net effect of these entries is that the bad debt is reversed, and Mr. Aslam’s accounts receivable balance is restored. The income statement remains unaffected, but the balance sheet reflects the recovery of the previously written-off amount¹².

In summary:

• Year 20X6:

  • Debit Bad Debts (Expense) Account: Rs. 30,000/-
  • Credit Accounts Receivable (Mr. Usman) Account: Rs. 30,000/-

• Year 20X7:

  • Debit Cash Account: Rs. 30,000/-
  • Credit Accounts Receivable (Mr. Usman) Account: Rs. 30,000/-