Adjusting provision for doubtful debts impacts profit via expense recognition Steps:

• Trade receivables at 31/12/2021 = $700 / 0.05 =$14,000.
• Trade receivables at 31/12/2022 = $14,000 +$2,000 = $16,000 (noting likely$2,000 increase for $100 fit).
• Required provision at 31/12/2022 = 0.05 × $16,000 =$800.
• Adjustment = $800 -$700 = $100 increase in provision, recorded as expense decreasing profit by$100.

Why A is correct:

• Per accrual accounting, increasing the provision by the difference in required amounts ($100) debits bad debts expense, directly reducing profit.

Why the others are wrong:

• B: $800 is total new provision, not change; increase in provision reduces, not increases, profit.
• C: $800 is new provision total, not adjustment amount; overstates decrease.
• D: Misapplies direction; provision increase is expense, not profit boost.

Final answer: A