1 A business makes a provision for doubtful debts of 3% of debtors, also a provision of 1% for discount on debtors. On 1 January 2008 the balances brought forward on the relevant accounts were...

1

A business makes a provision for doubtful debts of 3% of debtors, also a provision of 1%

for discount on debtors.

On 1 January 2008 the balances brought forward on the relevant accounts were provision for

doubtful debts £930 and provision for discounts on debtors £301.

You are required to:

(a) Enter the balances in the appropriate accounts, using a separate provision for doubtful debts

account.

(b) During 2008 the business incurred bad debts £1,110 and allowed discounts £362. On

31 December 2008 debtors amounted to £42,800. Show the entries in the appropriate accounts

for the year 2008, assuming that the business’s accounting year ends on 31 December 2008,

also extracts from the profit and loss account statement at 31 December 2008.