Multiple choice

A decrease in the provision for doubtful debts would result in

  1. an increase in liabilities

  2. a decrease in working capital

  3. a decrease in net profit

  4. an increase in net profit
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Provision for doubtful debts is an expense that reduces net profit. Decreasing this provision reduces the expense, thereby increasing net profit. It's important to note that this is an accounting estimate, not an actual cash transaction.

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