Question

State with reason whether Provision for Doubtful Debts is subtracted from Trade Receivables while computing Current Ratio.

Answer 1

Provision for doubtful debts is subtracted from Trade receivables while computing the current ratio because the realisable value of Trade receivables is taken into consideration.

Answer 2

Yes, Provision for Doubtful Debts is subtracted from Trade Receivables while computing the current ratio. This is because the Current Ratio is calculated using the net realisable value of trade receivables, which represents the amount that is expected to be collected after accounting for probably bad debts.