Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 19 - No. 17)
What is the purpose of a provision for doubtful debts?
To avoid paying taxes.
To estimate and record potential losses from uncollectible accounts.
To increase a company's cash balance.
To reduce the value of inventory.
Explanation
The provision is created to reflect the estimated amount of accounts receivable that may not be collected, which is a potential loss.
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