Gross profit
This query is : Resolved
CA Sanjana arora
(Querist)
26 June 2013
hello experts,
Can a small dealer's Gross profit exceeds its sales because of closing stock.
Can a small dealer's Gross profit exceeds its sales because of closing stock.
CA Kishore Tallam
(Expert)
26 June 2013
No question of profit exceeding sales. If it exceeds, u have valued ur closing stock at very high and incorrect rates.
CA Sanjana arora
(Querist)
26 June 2013
ya i know that...but dealer is paying very high rent and he wants to show profit so he valued his stock at high rate
CA Sanjana arora
(Querist)
26 June 2013
can we take Lease rent of the shop as a direct exp. for the dealer
CA Kishore Tallam
(Expert)
26 June 2013
If it is a direct expense related to stock, u can take it. Even then, ur gross profit cannot exceed ur sales.
CA Sanjana arora
(Querist)
26 June 2013
ya if i take lease rent as a direct exp. for dealer then G.P. is lower then sale it will be 43%. but i have a doubt that can lease rent be considered as direct exp. or not
CA Kishore Tallam
(Expert)
26 June 2013
It needs to be decided on a case to case basis. If it can be rendered as direct expense, then load them in closing stock else not.
CA Sanjana arora
(Querist)
26 June 2013
what you mean by load them in closing stock?
CA Kishore Tallam
(Expert)
26 June 2013
If it is a direct expense related to stock, then the closing stock value shall also include proportionate value of direct expenses also.
CA Sanjana arora
(Querist)
26 June 2013
ok...thanks a lot
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