The balance sheet as at 31 May 19X7 of Forest Traders Limited included a provision for doubtful debts of £2,300. The company’s accounts for the year ended 31 May 19X8 are now being prepared. The company’s policy now is to relate the provision for doubtful debts to the age of debts outstanding. The debts outstanding at 31 May 19X8 and the required provisions for doubtful debts are as follows:

Customers are allowed a cash discount of 2%% for settlement of debts within one month. It is now proposed to make a provision for discounts to be allowed in the company’s accounts for the year ended 31 May 19X8.
Required:
Prepare the following accounts for the year ended 31 May 19X8 in the books of Forest Traders Limited to record the above transactions:

(a) Provision for doubtful debts;
(6) Provision for discounts to be allowed on debtors.

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Debts outstanding Amount Up to 1 month 24,000 More than 1 month and up to 2 months 10,000 More than 2 months and up to 3 months More than 3 months 3,000 8,000 Provision for doubtful debts % 1 245