The creation of provision for doubtful debts given as an adjustment requires____________?
Correct answer: A. Debit Profit and Loss Account and deduct the provision from debtors
- A. Debit Profit and Loss Account and deduct the provision from debtors
- B. Credit Profit & Loss Account and deduct the provision from debtors
- C. Credit Profit and Loss Account and add the provision to debtors
- D. Debit Profit & Loss Account and add the provision to debtorsExplore Sci-Fi Shows
Explanation
Creating a doubtful-debt provision recognizes an expense by debiting Profit and Loss Account and reduces the expected collectible amount of receivables by deducting the provision from debtors. The provision is not added to 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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