H Crawrford had a business which adjusted its provision for bad debts at the end of the
Question:
H Crawrford had a business which adjusted its provision for bad debts at the end of the financial year, at a given percentage of the total debtors. The percentage varied each year, depending on the economic situation. Irrecoverable debts were written off during the year to a bad debts account, as and when they occurred. On 1 January 20-1 the balance on the provision for bad debts account was £500.
Bad debts Total debtors Rate of written off at year end percentage for during year to provision of bad debts account doubtful debts
£
£
%
December 20-1 750 14,000 5
December 20-2 4,085 10,000 10 December 20-3 2,900 15,000 5
From the above information you are required to;
(a) Prepare the bad debts account clearly showing the transfer to the final accounts, for the financial years 31 December 20-1, 20-2 and 20-3.
(b) Prepare the provision for bad debts account for the years 31 December 20-1, 20-2 and 20-3 clearly showing the balance brought forward each year.
(c) An extract from the balance sheets showing how the provision would affect the total debtors, as at 31 December 20-1, 20-2 and 20-3.
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