Question

A decrease in the provision for doubtful debts would result in _____:
(a) Increase in liability (b) Decrease in liability
(c) Decrease in net profit (d) Increase in net profit

Answer 1

decrease in liability

Answer 2

Answer:

The correct option is D) Net profit will increase

Explanation:

The doubtful debts are those debts As the name suggest, doubtful debt refers to debt that is unlikely to be repaid.

The debts in which we have doubt to get repaid by any reason. And these debts will change into bas debts if not beem repaid immediately.

If the provision of doubtful debts decreases that means the chances of getting payment increases. This will result in increase in the net profit.

If a provision for doubtful debts would decrease then debit balance of profit and loss A/c would decrease and ultimately net profit would increase