The following transactions are to be recorded. At the beginning of year 1 a provision for doubtful debts account is to be opened. It should show a provision of 2 per cent against trade receivables of £50,000. During the year bad debts of £2,345 are to be charged to the provision account. At the end of year 1 the bad debts provision is required to be 2 per cent against trade receivables of £60,000.

In year 2 bad debts of £37 are to be charged against the account. At the end of year 2 a provision of 1 per cent against trade receivables of £70,000 is required.

Required

Prepare provision for doubtful debts account for the two years. Show in the account the double entry for each item, and carry down the balance at the end of each year.