Recovery of a written-off receivable

A receivable recovery occurs when cash is collected after a receivable was written off. The accounting follows the entity's controlled policy and must preserve the link among the old writeoff, any reinstatement, cash, the allowance, and the current expected-loss estimate.

Keep recovery separate from revenue

Assume a customer pays $1,000 on an account written off earlier. Under a reinstatement convention, the entity first restores the receivable and allowance, then records the cash collection. The two entries make the collection trail visible. The recovery is not new sales revenue because no new goods or services were provided.

A direct recovery convention can produce a different entry sequence. State the convention before solving the allowance rollforward. In the course example, the $1,000 recovery enters the allowance bridge as a positive component. It is not added to ending gross receivables because reinstatement and collection offset within the period.

Reassess the estimate

A recovery can also provide evidence about collection expectations for similar assets. Do not change a pool rate automatically from one payment. Evaluate relevance, timing, population, and whether the model already includes recoveries.

Boundary and source

Collection does not prove that the earlier writeoff was wrong; the facts may have changed. Read ASC 326-20-35-8 for writeoffs and recoveries and keep the entity's entry convention consistent with its allowance rollforward.