If the purchase of shop fitting for £25,000 is included in the cost of sales, then:
A) Gross profit ONLY will be understated by £25,000.
B) Gross profit ONLY will be overstated by £25,000.
C) Net profit ONLY will be understated by £25,000.
D) Both gross profit and net profit will be understated by £25,000.

Question

Quizplus · Accepted Answer

Including shop fitting in the cost of sales incorrectly increases the cost of goods sold, reducing both gross profit and net profit by £25,000.

If the Purchase of Shop Fitting for £25,000 Is Included