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Bad debts of Rs 4,000 owed by Ramesh were previously written off in the books of Gupta Traders. Ramesh unexpectedly pays Rs 4,000 in cash during the current year. The journal entry required is:

Debit Cash A/c Rs 4,000 and credit Bad Debts Recovered A/c Rs 4,000. The debt was already written off, so Ramesh's account has no balance; the cash received is treated as income of the current year, not a settlement of a customer account.

  1. ACash A/c Dr. 4,000 To Bad Debts Recovered A/c 4,000Correct
  2. BCash A/c Dr. 4,000 To Ramesh 4,000
  3. CRamesh Dr. 4,000 To Bad Debts Recovered A/c 4,000
  4. DBad Debts Recovered A/c Dr. 4,000 To Cash A/c 4,000

Explanation

Since Ramesh's account was closed on write-off, the receipt is a gain, so Cash is debited and Bad Debts Recovered (income) is credited. Option B wrongly credits Ramesh's closed account, which would leave a credit balance with no debt. Options C and D do not record a cash receipt correctly.

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