Why decrease in provision for doubtful debts is deducted from net profit in cash flow statement?

Dear Student,

A decrease in provision for doubtful debts would mean that now more amount shall be recoverable from the debtors i.e. debtors of the business will increase.

And so, whether you consider a decrease in provision for doubtful debts as 'a decrease in current liability' or 'an increase in current asset', both are added under 'Operating Activity'.  


Regards

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