A business keeps a provision for doubtful debts equal to 5% of trade receivables. On 31 December 2018, the balance in the provision for doubtful debts account was $2700. By 31 December 2019, trade receivables had reached $50 000. How will the necessary adjustment to the provision for doubtful debts be recorded?
- Aprovision for doubtful debts account: credit $200; income statement: added to gross profit $200
- Bprovision for doubtful debts account: credit $200; income statement: deducted from gross profit $200
- Cprovision for doubtful debts account: debit $200; income statement: added to gross profit $200
- Dprovision for doubtful debts account: debit $200; income statement: deducted from gross profit $200