Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 1 - No. 10)
If a company increases its provision for doubtful debts, what would be the effect on its net income (assuming no other transactions)?
Net income would increase.
Net income would decrease.
Net income would remain the same.
It depends on the company's cash flow.
Explanation
Increasing the provision results in a debit to expense (bad debt expense), which reduces net income.
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