diff --git a/mifosng-provider/src/main/java/org/mifosplatform/accounting/journalentry/service/AccrualBasedAccountingProcessorForLoan.java b/mifosng-provider/src/main/java/org/mifosplatform/accounting/journalentry/service/AccrualBasedAccountingProcessorForLoan.java
index 622a17b6b..88beda174 100755
--- a/mifosng-provider/src/main/java/org/mifosplatform/accounting/journalentry/service/AccrualBasedAccountingProcessorForLoan.java
+++ b/mifosng-provider/src/main/java/org/mifosplatform/accounting/journalentry/service/AccrualBasedAccountingProcessorForLoan.java
@@ -55,6 +55,11 @@ public class AccrualBasedAccountingProcessorForLoan implements AccountingProcess
                         .getTransactionType().isRepaymentAtDisbursement() || loanTransactionDTO.getTransactionType().isChargePayment());
             }
 
+            /** Logic for handling recovery payments **/
+            else if (loanTransactionDTO.getTransactionType().isRecoveryRepayment()) {
+                createJournalEntriesForRecoveryRepayments(loanDTO, loanTransactionDTO, office);
+            }
+
             /** Handle Write Offs, waivers and their reversals **/
             else if ((loanTransactionDTO.getTransactionType().isWriteOff() || loanTransactionDTO.getTransactionType().isWaiveInterest() || loanTransactionDTO
                     .getTransactionType().isWaiveCharges())) {
@@ -201,6 +206,33 @@ public class AccrualBasedAccountingProcessorForLoan implements AccountingProcess
         }
     }
 
+    /**
+     * Create a single Debit to fund source and a single credit to
+     * "Income from Recovery"
+     * 
+     * In case the loan transaction is a reversal, all debits are turned into
+     * credits and vice versa
+     */
+    private void createJournalEntriesForRecoveryRepayments(final LoanDTO loanDTO, final LoanTransactionDTO loanTransactionDTO,
+            final Office office) {
+        // loan properties
+        final Long loanProductId = loanDTO.getLoanProductId();
+        final Long loanId = loanDTO.getLoanId();
+        final String currencyCode = loanDTO.getCurrencyCode();
+
+        // transaction properties
+        final String transactionId = loanTransactionDTO.getTransactionId();
+        final Date transactionDate = loanTransactionDTO.getTransactionDate();
+        final BigDecimal amount = loanTransactionDTO.getAmount();
+        final boolean isReversal = loanTransactionDTO.isReversed();
+        final Long paymentTypeId = loanTransactionDTO.getPaymentTypeId();
+
+        this.helper.createAccrualBasedJournalEntriesAndReversalsForLoan(office, currencyCode, ACCRUAL_ACCOUNTS_FOR_LOAN.FUND_SOURCE,
+                ACCRUAL_ACCOUNTS_FOR_LOAN.INCOME_FROM_RECOVERY, loanProductId, paymentTypeId, loanId, transactionId, transactionDate,
+                amount, isReversal);
+
+    }
+
     /**
      * Recognize the receivable interest <br/>
      * Debit "Interest Receivable" and Credit "Income from Interest"