Question

Why provision for doubtful debts is not deducted from debtors while calculating ‘Debtors Turnover Ratio’?

Answer 1

Provisions for doubtful debts are not deducted from debtors when calculating the debtor turnover ratio because the ratio shows how efficiently credit sales are collected. Deducting the provision would reduce debtors wrongly. So, gross debtors are taken, not net debtors.