Debtor ka 20% nikalke provision m aajega and then we duducted this provision from debtor
20% provision of debtor is raised so it will be shown on the debit side of revolution account because our liability is increased

Provision for doubtful debts is a reserve that companies set aside to account for the possibility that some of their customers may not pay their debts. The provision is an estimate of the amount of debts that are unlikely to be repaid and is based on historical data and current economic conditions.


Raising the provision for doubtful debts to 20% of debtors means that the company expects a higher percentage of its customers to default on their debts. This would have a number of implications for the company:

• Reduced reported profits: The increased provision would reduce the company's reported profits, as it is considered an expense.


• Impact on cash flow: The provision would also have an impact on the company's cash flow, as it reduces the amount of cash that is available for use.


• Impact on shareholders: The provision would also have an impact on shareholders, as it reduces the amount of money that is available for distribution as dividends.


• Impact on creditworthiness: The provision could also impact the company's creditworthiness, as it suggests that the company may have difficulty collecting its debts.


• Improved risk management: However, raising the provision would also indicate that the company is taking a more conservative approach to its accounting and risk management practices, which could be seen as a positive by investors and lenders.

In conclusion, raising the provision for doubtful debts to 20% of debtors would have both positive and negative implications for the company. While it would reduce reported profits and impact cash flow and shareholders, it could also improve risk management practices. Ultimately, the decision to raise the provision should be based on a careful assessment of the company's financial position and the risks associated with its customer base.