A business makes a provision for doubtful debts of 5% of debtors, also a provision of 2'/2% for discount on debtors. On 1 January 20X7 the balances brought forward on the relevant accounts were provision for doubtful debts £672 and provision for discounts on debtors £631. You are required to:

(a) Enter the balances in the appropriate accounts, using a separate Provision for Doubtful Debts Account.

(b) During 20X7 the business incurred bad debts £2,960 and allowed discounts £6,578. On 31 December 20X7 debtors amounted to £25,600. Show the entries in the appropriate accounts for the year 20X7, assuming that the business’s accounting year ends on 31 December 20X7, also balance sheet extracts at 31 December 20X7.