4.8 Ulrich, who runs a public relations consultancy business, prepares his accounts to 31 July each year. At 31 July 20X5 his trade receivables list totals £397,700. Included in the list is an amount of £17,000 owing by Gayle Associates. Gayle Associates has recently ceased to trade and Ulrich has been told by Gayle’s administrator that there is little likelihood of him ever recovering the £17,000 owing to him.

Ulrich is concerned that some of the other businesses that owe him money could run into difficulties.

He decides to make a general allowance for doubtful debts of 1% of receivables balances that have been outstanding for more than three months at 31 July 20X5 (excluding the £17,000 owed by Gayle). He has never previously made an allowance against receivables.

An analysis of Ulrich’s receivables at 31 July 20X5 shows the following:

£

Outstanding for one month or less 169,930 Outstanding for between one month and three months 143,370 Outstanding for over three months 67,400 Gayle Associates 17,000 397,700 How will trade receivables be presented in Ulrich’s statement of financial position at 31 July 20X5? What is the effect of bad and doubtful receivables on Ulrich’s profit for the year?