Leonard Ltd is a small firm. For the six-month period ending 30 June of the current year, it made sales totalling $40 000. These sales were on credit and were all made in the last four months. To determine its bad debts expense, it uses an ageing schedule of accounts receivable that has proven to be relatively accurate. For the six-month period, the following calculation was made of accounts receivable multiplied by the uncollectable percentage: 60 days and under 61-90 days 91-120 days Over 120 days Total $30 000 1% === $ 300 10 000 3% = 300 8 000 x 6% 4 000 x 12% = $52.000 = 480 480 $ 1560 There was no remaining balance in Provision for Doubtful Debts at the end of the six-month period. Leonard Ltd recorded $1560 as a bad debts expense, which was one of the expenses deducted from sales revenue of $40 000 on the income statement. Is the $1560 the proper amount of expense to match against the $40 000 sales revenue? Explain. Where the Provision for Doubtful Debts is inadequate, leading to a significant expense affecting current year profits but relating to revenue from a previous period, is it consistent with the matching concept to write off the debt in the current period?

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