J. Blane commenced business on 1 January 2013 and prepares her financial statements to 31 December every year. For the year ended 31 December 2014, bad debts written-off amounted to £1,400. It was also found necessary to create an allowance for doubtful debts of £2,600.
In 2014, debts amounting to £2,200 proved bad and were written-off. J. Sweeny, whose debt of £210 was written-off as bad in 2013, settled her account in full on 30 November 2014.
As at 31 December 2014 total debts outstanding were £92,000. It was decided to bring the provision up to 4% of this figure on that date.
In 2015, £3,800 of debts were written-off during the year, and another recovery of £320 was made in respect of debts written-off in 2013. As at 31 December 2015, total debts outstanding were £72,000. The allowance for doubtful debts is to be changed to 5% of this figure.