An increase in provision for doubtful debts would result in
Question 1 Report
An increase in provision for doubtful debts would result in
Answer Details
An increase in the provision for doubtful debts would result in a decrease in net profit.
Provision for doubtful debts is an estimated amount set aside by a company to cover the possibility of customers not paying their debts. When a company increases its provision for doubtful debts, it is essentially acknowledging that there is an increased likelihood that some customers will not pay their debts. This acknowledgment is reflected in the income statement as an expense, which reduces the net profit.
Therefore, an increase in provision for doubtful debts would reduce the net profit of the company, resulting in a decrease in the amount of profit that the company earns after deducting all its expenses from its revenue.
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