net profit will increase
Opening and closing stock directly impact gross profit by influencing the cost of goods sold (COGS). The formula for COGS is: Opening Stock + Purchases - Closing Stock. If opening stock is high or closing stock is low, COGS increases, reducing gross profit. Conversely, low opening stock or high closing stock decreases COGS, thereby increasing gross profit.
i think Gross profit Will decrease
profit or loss
GROSS PROFIT = SALES - [OPENING STOCK + PURCHASES + DIRECT EXPENSES - CLOSING STOCK]... substitute if u have all the other values
closing stock will increase current assets in Balance sheet
Opening and closing stock directly impact gross profit by influencing the cost of goods sold (COGS). The formula for COGS is: Opening Stock + Purchases - Closing Stock. If opening stock is high or closing stock is low, COGS increases, reducing gross profit. Conversely, low opening stock or high closing stock decreases COGS, thereby increasing gross profit.
i think Gross profit Will decrease
A business remaining stock at the end of an accounting period is known as closing stock. It may include the finished goods, raw material and work in process and it is also deducted from the periods costs in the balance sheet. however sales in the trading a/c do have an effect on the gross profit and hence in the profit and loss a/c for the net profit. An increase or decrease in closing stock will have an effect on the net profit..if closing stock increase the gross profit will increse and vice versa. As the gross profit will increase the firm will able to deduct more expenses from it and hence the remaining will be the net profit.( increase)
Overstatement of closing stock will inflate profit and overstatement of opening stock will have an inverse effect.
previous year profit under stated and present year profit understated
this is overvaluing of closing stock --> gross profit overstate --> net profit overstated. current assets overstated.
How do I find the opening stock when given the closing stock
profit or loss
GROSS PROFIT = SALES - [OPENING STOCK + PURCHASES + DIRECT EXPENSES - CLOSING STOCK]... substitute if u have all the other values
If Opening Stock is undervalued, this will result in your Cost of Sales being understated and therefore Gross and Net Profit being overstated. Of course, since Opening Stock in this period is the last period's Closing Stock, this would mean that Closing Stock in the last period was understated too, meaning that Net Profit in the last period was understated. That doesn't make it OK though!
closing stock will increase current assets in Balance sheet
it s transfer to profit and loss account.