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June 2011 Q3

This topic has 1 reply, 2 voices, and was last updated 4 years ago by Kim Smith.

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September 4, 2020 at 8:41 am #583347
toushiga
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Wexford Co
Q3(b)
“Analytical procedures on gross profit margins, comparing the opening and closing gross profit margins year on year for the various types of items held in inventory”
1. How the GPM can be reflect for the op.bal of inventory as the cost of sales have include purchase of the year and adjusted for cl.bal of inventory?
September 4, 2020 at 2:27 pm #583442
Kim Smith
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Suppose a business has stable GP% around 20%.
If closing inventory is overstated (say) – GP% will be inflated – but in the following year there will be corresponding fall – i.e. compensating fluctuations might signify misstatements.
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