(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 at each year end.

The debtors on 31 December each year were as follows;

£

20-4 8,000 20-5 8,000 20-6 11,000 You are required to show the necessary entries for the years ended 31 December 20-4, 20-5 and 20-6 in;

(i) The provision for bad debts account.

(ii) The profit and loss account.