Question

Goods returned by Y for Rs. 10,000 passed through the Purchases Book. The error will result in ________________.

• A. Increase in gross profit
• B. Decrease in gross profit
• C. No effect on gross profit
• D. Either (a) or (b)

Answer 1

Answer: (B)

Decrease in gross profit

Goods returned by Y for Rs. 10,000 should have been passed through Purchase return book. By passing the wrong entry through purchase book, the debit side is increased or say purchase expenses are increased which should have rather decreased. Hence, it would decrease the gross profit.