At its year end, a business has outstanding trade receivables totalling ( 90,000). The balance on the

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At its year end, a business has outstanding trade receivables totalling \(£ 90,000\). The balance on the allowance for doubtful debts account brought forward from the previous year is \(£ 4,000\). Based on an analysis of the business's debt collection experience, an allowance for doubtful debts equal to \(4 \%\) of trade receivables is required. What is the correct entry to record this?

(A) Dr Bad debt expense \(£ 400, \mathrm{Cr}\) Allowance for doubtful debts \(£ 400\)

(B) Dr Allowance for doubtful debts \(£ 400, \mathrm{Cr}\) Bad debt expense \(£ 400\)

(C) Dr Bad debt expense \(£ 3,600, \mathrm{Cr}\) Allowance for doubtful debts \(£ 3,600\)

(D) \(\operatorname{Dr}\) Allowance for doubtful debts \(£ 3,600, \mathrm{Cr}\) Bad debt expense \(£ 3,600\)

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