Bickley Brothers sell luxury picnic hampers from their prestigious shop in London.

When the firm’s accountant drew up the list of Receivables Ledger balances at the business’s year-end, 31 May 2014, the following information was revealed:

£

Total balances 13,525 This includes £2,400 owed by Robin Taylor, now considered to be a bad debt, and a further number of doubtful debtors, amounting to £3,500.

Bickley Brothers had an opening balance of £3,000 on its provision for doubtful debts at 1 June 2013.

On 31 May 2015, the business had total Receivables Ledger balances of £17,630. Of that total, one customer, Moira Harris, owes £600 which is considered to be a bad debt.

A further £3,200 of trade receivables is considered doubtful at that date.

(a) Explain the difference between bad and doubtful debts.

(b) Show the relevant extracts from the income statements for each of the years ended 31 May 2014 and 31 May 2015 and the statements of financial position ended on those dates.

(c) What would be the effect on the income statement for the year ended 31 May 2015 and the statement of financial position as at that date if on 4 December 2014 Robin Taylor pays the amount he owed?