Accounting for IGCSE & O level - Final Statements (Section 12 - No. 13)
What is the significance of a 'provision for doubtful debts'?
It reduces the value of sales.
It increases the value of trade receivables.
It estimates the portion of receivables that may not be collected.
It increases the profit for a given year.
Explanation
A provision for doubtful debts estimates the portion of trade receivables that are unlikely to be collected.