An increase in provision for doubtful debts would result in
Decrease in net profit
Increase in net profit
Decrease in gross profit
Increase in gross profit
Correct answer is A
Increase in provision for doubtful debt occurs when the current year's provision for doubtful debts is more than the previous year's provision. In the final account, increase in provision for doubtful debts is debited to profit and loss account but in the balance sheet, the increase is added to any previous provision and the total subtracted from the debtors balance. Therefore, it will reduce the net profit from the profit and loss account.