The provision for doubtful debts are deducted......... from trade receivables for calculating the current ratio and quick ratio.

Deducted

Trade receivables, also known as accounts receivable, are considered a current asset because they are expected to be converted into cash within a short period, usually within a year. However, not all trade receivables are expected to be collected in full due to the risk of non-payment by customers. To account for this uncertainty, companies create a provision for doubtful debts as an estimated amount of the receivables that may not be collected. Since the provision for doubtful debts represents an anticipated loss, it is deducted from trade receivables when calculating both the current ratio and quick ratio to present a more conservative and realistic measure of a company's short-term liquidity. By doing so, the ratios provide a clearer picture of the company's ability to meet its short-term obligations, considering potential credit losses on outstanding customer invoices.