Which of the following is the effect on net income, if a business creates a provision for doubtful debts?

It will increase net income

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It will decrease net income

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No effect

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It will increase gross profit and net income

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Solution

The correct option is B
It will decrease net income

It will decrease the net income.

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Similar questions

A business firm creates provisions against doubtful debt under which of the following conventions

Which account is credited while creating a provision for doubtful debts in the books?

Which account is debited while creating a provision for doubtful debts in the books?

What is the entry for creating the provision for doubtful debts?

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