7.3 At 31 December 20X2 John’s debtors owed him £10,000. He had not, up to this time, maintained a provision against doubtful debts account but now thought he should set one up and decided that he should base his provision on 5 per cent of the debtors. He made the necessary adjustment on 31 December 20X2.

The following figures relate to the years ended 31 December 20X3 and 20X4:

Sales Cash received from customers Bad debts written off Cash received in respect of a bad debt written off in 20X3 20X3 20X4

£ £

120,000 130,000 115,000 136,000 1,000 300 200 Required:

(a) Prepare John s bad debts expense account and provision against doubtful debts account for the years ended 31 December 20X3 and 20X4.

(b) How would you treat the receipt of £200?