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    Question

    Goods purchased from A for ₹10,000 passed through the

    sales book. The error will result in:
    A Increase in gross profit Correct Answer Incorrect Answer
    B Decrease in gross profit Correct Answer Incorrect Answer
    C No effect on gross profit Correct Answer Incorrect Answer
    D Increase in liabilities Correct Answer Incorrect Answer

    Solution

    Purchases should be debited, but if wrongly recorded in the sales book, it results in an increase in both sales and gross profit. Since actual purchases are understated and sales are overstated, gross profit will be overstated, causing a fictitious increase in gross profit.

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