Mukilan is a trader. His financial year ends on 30April. He maintains a provision for doubtful debts of 5% of the trade receivables at the end of each year.

On 1 May 2020 Mukilans provision for doubtful debts amounted to $500. On 30^th April 2021 his credit customers owed $18,000.

REQUIRED:

1. Prepare the Provision for Doubtful Debts account for the year ended 30^th April 2021. Balance the

account and bring down the balance on 1^st May 2021. (10 marks)

1. Prepare an extract from the statement of financial position on 30April 2021 to show the Trade Receivables. (10 marks)

(c ) State the difference between a bad debt and a provision for bad debts. (3 marks)

1. Suggest two ways in which Samar could reduce the risk of bad debts. (2 marks)

(25 marks)