Mr. Khan starts his business on 1 January 2010. During the year he sold goods on credit amounting Rs. 500000. Mr. Khan collected Rs. 260000 from these customers during the year. However, out of remaining debtors, one debtor, Mr. Butt, refused to pay his debt amounting Rs. 40000 on due date as he became bankrupt. At the yearend Mr. Khan estimated that another debtor, Mr. Rana, amounting Rs. 70000 is facing financial difficulties so he will not pay his debt on the due date so it is appropriate to create an allowance for this customer.