Answer: 1. To ensure that profit for the year is not overstated. 2.sales is regarded as the expense of the year in which those sales are made and not when the debt is written off.
Explanation:
Provision for doubtful debt is the estimate of the bad debt expected in business within the financial year.with a view to be on the safer side therefore a business are expected to make a provision for doubtful debt. It is always shown as a deduction from sundry debtors in the balance sheet. This ensures that profit for the year is not overstated and also to ensure that the amount of sales for the year is shown in a realisable state in the balance sheet
2. When the amount of sales for the business is not likely to be paid is regarded as an expense in the year under review in which such sales are made. Instead of the expense of the year in which the debt is written off.
