Make a provision for discounts to be allowed in the company

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Reference no: EM131385721

The statement of financial position as at 31 May 2014 of Pondlake Limited included an allowance for doubtful debts of £4,600. The company's accounts for the year ended 31 May 2015 are now being prepared. The company's policy now is to relate the allowance for doubtful debts to the age of debts outstanding. The debts outstanding at 31 May 2015 and the required allowances for doubtful debts are as follows:

Debts outstanding	Amount	Allowance for doubtful debts
	£	%
Up to 1 month	60,000	0.5
More than 1 month and up to 2 months	42,000	1
More than 2 months and up to 3 months	34,000	2
More than 3 months	20,000	3

Customers are allowed a cash discount of 2% for settlement of debts within one month. It is now proposed to make a provision for discounts to be allowed in the company's accounts for the year ended 31 May 2015.

Reference no: EM131385721

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