Gross profit
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
18 July 2013
what are the factors that lead to increase in gross profit and how does undervaluation of opening stock increase gross profit???
CA Parul Saxena
(Expert)
18 July 2013
Gross Profit is basically:-
Sales-Cost of goods sold=Gross profit
Cost of goods sold=Opening Stock+Purchase-Closing Stock.
So if in the above equation Opening stock is undervalued it means less of 'Cost of goods sold' and hence 'increasing the Gross Profit'.
Gross profit can be increased if Sales increases or Cost of goods sold decreases.
Sales-Cost of goods sold=Gross profit
Cost of goods sold=Opening Stock+Purchase-Closing Stock.
So if in the above equation Opening stock is undervalued it means less of 'Cost of goods sold' and hence 'increasing the Gross Profit'.
Gross profit can be increased if Sales increases or Cost of goods sold decreases.
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