Question

Gross profit is to be distributed in *

Turnover Ratio

Time Ratio

Post incorporation period

Pre incorporation period​

Answer 1

Answer:

gross profit is to be distributed in Pre incorporation period

Answer 2

Gross profit is to be distributed in the Turnover ratio.

Explanation:

• When a company decides to take over the business of any other enterprise, then sometimes a time gap occurs.
• This time gap will be in the incorporation of the company.
• Because of this time gap between the purchase of business and incorporation of the company, the income and expenses cannot be transferred to the company's account because it is not in existence.
• So, the whole expenses and income of that period are divided between the post and pre-incorporation period.
• And the other standards are taken to distribute the income and expenses between these periods.
• Such as time ratio, sales ratio, no. of employees, floor area, etc.
• So, the gross profit will come under the turnover ratio.