(a) What are the differences between bad debts written off and provision for bad debts? (b) Give...
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(a) What are the differences between bad debts written off and provision for bad debts?
(b) Give two reasons for creating a provision for bad debts.
(c) What is meant by bad debts recovered? How are such items entered in the profit and loss account of a business?
(d) On 1 January 20-4 there was a balance of £500 in the provision for bad debts account, and it was decided to maintain the provision at 5 per cent of the debtors’ total at each year-end.
The debtors on 31 December each year were as follows:
You are required to show the necessary entries for the years ended 31 December 20-4, 20-5 and 20-6 in:
(a) the provision for bad debts account; and
(b) the profit and loss account.
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