Answer
The major uses of the gross profit method are:
1. To provide an approximation of the ending inventory which the auditor might use for testing validity of physical inventory count;
2. It means that a physical count need not be taken every month or quarter.
3. It helps in determining damages caused by casualty when inventory cannot be counted.
Work Step by Step
Gross profit is the profit an entity makes after deducting the costs affiliated with making and selling its products, or the costs affiliated with providing its services.
