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Johnny is a sole proprietor dealing with a business of selling books starts a business on 1st January 2007 and its financial year ended on

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Johnny is a sole proprietor dealing with a business of selling books starts a business on 1st January 2007 and its financial year ended on 31 December 2007. Provided below are information about his account receivables, bad debts and allowance for doubtful debts at estimate rate of 3% of all debtors each year. Year Bad debts written off Account receivable before deduction of bad debts RM 7,023 8, 010 8, 404 RM 423 510 604 2014 2015 2016 Required: a) Show all entries in bad debt account, allowance for doubtful debts and profit and loss account from 2014 until 2016. (18 marks) b) Explain the two (2) main purpose for a business to set up their allowance for doubtful debts. (6 marks) [Total = 24 marks]

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