When making an adjustment to create a provision for doubtful debts, which accounting entry is required?

Show Answers

Debit the Profit and Loss Account and subtract the provision from debtorsCredit the Profit and Loss Account and reduce the debtors by the provision amountCredit the Profit and Loss Account and increase the debtors by the provisionDebit the Profit and Loss Account and add the provision to the debtors balanceNone of the above

Explanation

To record the provision for doubtful debts, the correct entry is to debit the Profit and Loss Account since it represents an expense, and reduce the Sundry Debtors balance by the provision amount. This reflects the expected uncollectible portion of the receivables and charges it against the profits.