At the end of year 1, Down and Out Ltd had a debtors balance of 253 256. They identified bad debts amounting to 4354 included in that balance. In addition to recording these, they decided to set up a provision for doubtful debts amounting to 3 per cent of the remaining debtors. In year 2, a debt of 1078 proves to be bad and is written off. At the year end, it is decided to set a provision of 4 per cent of the year end debtor balance of 68 921. Required Using a manual system and T accounts, open a bad debts account, a doubtful debts account and a change in doubtful debts account and write up the entries needed to record the above decisions first for assumption

(a) below and then for assumption (b):

(a) that the bad debt in year 2 is written off against the doubtful debts provision rather than as a separate expense in the profit and loss account;

(b) that the bad debt is written off separately leaving the provision from year 1 intact.