What would be the net effect of callums decision

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Question: Callum is a sole trader and has an accounting year end of 31 December. In December 2019, Callum wrote off a trade receivable of £8,000 from Jake who did not respond to payment reminders for over six months. In November 2020, Callum hears from Jake who is recovering from a period of ill health. Jake assures Callum that he would settle his debt in 2021.

After his conversation with Jake, Callum decides to reverse the write-off but also make a provision for 40% of Jake's debt. What would be the net effect of Callum's decision on the business's Income Statement for the year ended 31 December 2020?

Reference no: EM133346217

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