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impaired debts been deducted from gross profit
whihc includeds increase in allownace for trade debtors of 1870. arent provision for doubtful debts not deductible? in that case this 1870 shld be added back to the net profts right. but in solution they hv shown this adjustment as 0.An increase in a general provision is not allowable and should be added back in the adjustment to profit (if it has been deducted in the first place).
Is there more to the question that you’re not telling me?
Have you read the question correctly?
Gross profit is sales less cost of sales.
Net profit is gross profit less expenses (and expenses include impaired debts).
Therefore if an increase in a general provision has been included as an expense, then the increase is added back to NET PROFIT, not GROSS PROFIT.
If you apply that to the scenario does it make sense? Does the question ask what adjustments are made to GROSS PROFIT (in which case there would be no adjustment) or NET PROFIT (in which case you would add back the increase)?
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