Q.If there is no existing provision for Doubtful debts, provision created for Doubtful debts is :

With no existing provision, the full amount of a newly created provision for doubtful debts is debited to the Profit and Loss account, so the correct answer is option (c).

A provision for doubtful debts is an estimated loss on debtors. Creating it involves two effects:

• The amount is debited to the Profit and Loss account (charged against profit as an anticipated loss), and
• The Provision for Doubtful Debts account is credited (shown as a deduction from Sundry Debtors in the Balance Sheet). …