A recovery of bad debt

A. increases net income

B. decreases net income

C. increases gross profit

D. increases gross profit and net income

Answer: Option A

Solution(By Examveda Team)

A recovery of bad debt increases net income. Bad debt recovery is a payment received for a debt that was written off and considered uncollectible. The receivable may come in the form of a loan, credit line, or any other accounts receivable. Because it generally generates a loss when it is written off, bad debt recovery usually produces income.