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Question
Why is it necessary to create a provision for doubtful debts at the time of preparation of final accounts?
Answer in Brief
Solution
The creation of the provision of doubtful debt is made in order to make the prediction of the bad or doubtful debt b the business when the accurate position for the same can be made or determine in the next year only.
It is considered to be the prudent practice for any business organization as it reduces the scope of actual loss by the business.
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Provision for Bad and Doubtful Debts
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