An increase in provision for bad debt will____________?
Correct answer: A. Decrease net income
- A. Decrease net income
- B. Decrease liabilities
- C. Increase net income
- D. Increase liabilities
Explanation
An increased provision for bad debts is recognized as an expense, reducing reported profit or net income. It does not normally increase liabilities because it is generally presented as a deduction from receivables.
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About Financial Statements
Financial statements present a business's financial performance and position through the income statement, statement of financial position, cash flow statement and changes in equity. Questions involve preparing and interpreting these statements, adjusting entries, depreciation, closing inventory, accrued and prepaid items, and distinguishing profit from cash flow.
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