Question 1
Samar is a trader. His financial year ends on 30April. He maintains a provision for doubtful debts of 2 ½% of the trade receivables at the end of each year.
On 1 May 2020 Samar’s provision for doubtful debts amounted to $474. On 30th April 2021 his credit customers owed $17,440.

REQUIRED:
a. Prepare the Provision for Doubtful Debts account for the year ended 30th April 2021. Balance the account and bring down the balance on 1st May 2021
(5 marks)
b. Prepare an extract from the statement of financial position on 30April 2021 to show the Trade Receivables.
(5 marks)
c. State the difference between a bad debt and a provision for bad debts.
(5 marks)
d. Suggest two ways in which Samar could reduce the risk of bad debts.
(5 marks)
On 10th May 2021 Samar received a cheque, $49, from M Khan, whose account had been written off in 2020.
REQUIRED:
a. Prepare a journal entry to record the recovery of the bad debt.