Question

If the rate of gross profit increases in the current financial year, the same may happen due to which of the following reason?

• A. There is omission of purchases which was not accounted for.
• B. Closing stock was valued at higher price.
• C. Selling price has been increased without corresponding increase in cost.
• D. All of the above.

Answer 1

The correct option is D All of the above.

If the gross profit has shown an increase as compared to the previous year, and in-depth analysis has to be carried out to find out the reasons for such higher profits. Below are the probable reasons of showing the higher gross profit:

1) Purchases are omitted while recording the transactions.

2) Closing stock is valued at higher prices.

3) Selling prices are increased in the current year without a corresponding increase in cost.