(a) What are bad debts? Why is it necessary to write off bad debts?

(b) From the information below write up the bad debts account in the books of Jean Wilder for the year 20-7. Debts written off as irrecoverable were:

£

30 June A Noble 160 31 August P Jones 120 31 October R Scott 250 30 November L Skirrow 130 On 1 December 20-7 a final dividend of five pence in the pound was unexpectedly received in respect of the debt due from P Jones. Close off the bad debts account as on 31 December 20-7 and show the amount to be transferred to the profit and loss account.