A business maintains in its ledger a combined bad debts and provision for doubtful debts account. The provision was created in the accounts for the year ended 31 March 19X9 by calculating an amount equal to 5 per cent of the £10,000 outstanding debts at that date.

During the year ended 31 March 20X0 bad debts of £250 were incurred and at the balance sheet date the outstanding debts amounted to £12,500. It was decided to maintain the provision for doubtful debts at 5 per cent of the outstanding debts. During the year to 31 March 20X1, bad debts of £270 were incurred and the debts outstanding at balance sheet date amounted to £10,000. It was decided to adjust the doubtful debts provision to an amount equal to 4 per cent of the debts outstanding at 31 March 20X1.

Required:

(a) Record the above in the ledger of the business.

(b) Show the entries that would appear in the profit and loss account for each of the years to 31 March 19X9, 20X0 and 20X1 and on each of the three balance sheets made up to those dates.