A business makes an allowance for doubtful debts of 3% of accounts receivable, also a provision of 1% for discount on accounts receivable. On 1 January 2011 the balances brought forward on the relevant accounts were allowance for doubtful debts £930 and provision for discounts on accounts receivable £301.

(a) Enter the balances in the appropriate accounts, using a separate Allowance for Doubtful Debts Account. During 2011 the business incurred bad debts of £1,110 and allowed discounts of £362. On 31 December 2011 accounts receivable amounted to £42,800.

(b) Show the entries in the appropriate accounts for the year 2011, assuming that the business’s accounting year ends on 31 December 2011, also income statement extracts at 31 December 2011.