Example of Bad debt recovered income

Examples of Bad debt recovered income

Bad debt previously written off is recovered of $ 200 is income because it would add asset (increase cash) and according to definition the asset increase which would result in equity increase is income. The income is charged to a period in which it is recovered.

Profit Calculation

Profit	1,000
Bad debt recovered	200
Total profit	1,200

Equity

Paid up Capital	1,000
Profit	1,200
Equity	2,200