Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 7 - No. 38)
What is the purpose of a provision for doubtful debts?
To show the cash that is owed to the business.
To estimate the amount of receivables that are likely to be uncollectible.
To show the cash that the business expects to receive.
To estimate the total debt owed to the business.
Explanation
It is an estimate of the amount of trade receivables that a business will not be able to collect.
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