Beech is a retailer. Most of his sales are made on credit terms. The following information relates to the first four years that he has been in business:

The trade is one that experiences a high level of bad debts. Accordingly, Beech decides to set aside an allowance for doubtful debts equivalent to 10 percent of trade receivables as at
the end of the year.

Required:
(a) Show how the allowance for doubtful debts would be disclosed in the respective statement of financial positions as at 31 January 2018, 2019, 2020 and 2021.
(b) Calculate the increase/decrease in allowance for doubtful debts transferred to the respective statement of profit or loss for each of the four years.

Transcribed Image Text:

Trade receivables at 31 January 2018 £60000 2019 £55000 2020 £65000 2021 £70000