Why decrease in provision for doubtful debts is deducted from net profit in cash flow statwment?
Dear Student,
When provision for d/d is created or increasing over the year, it means we are creating it out of profit by reducing net profit, but it is a non cash activity, so while preparing CFS it should be added back to profit and vice-versa treatment when provision for d/d is decreasing.
Regards
When provision for d/d is created or increasing over the year, it means we are creating it out of profit by reducing net profit, but it is a non cash activity, so while preparing CFS it should be added back to profit and vice-versa treatment when provision for d/d is decreasing.
Regards