Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 28 - No. 33)
What is the purpose of preparing a provision for doubtful debts?
To ensure that all trade receivable is paid.
To reduce the company's tax liability.
To recognize the estimated loss from uncollectible trade receivables in the current period.
To improve the company's credit rating.
Explanation
A provision for doubtful debts estimates and recognizes losses that may arise from non-payment of debts from customers.
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