Determine this by adjusting the inventory value at the beginning of the year for any later additions and reductions. While the process for calculating gross profit is straightforward, the end result can only be as accurate as the items used to calculate it. The first item you should check is gross receipts. Daily records should balance with actual cash and credit receipts for that day. Cash registers conveniently track receipts.
Taxpayers also find it helpful to keep a separate bank account for business use.
Also, double-check records to make sure they record the correct sales tax collected. It's also a good idea to check your residence for merchandise from your office. Make sure you've adjusted the cost of goods sold for the cost of any items taken from inventory for personal use. Finally, the IRS recommends reviewing procedures used for taking inventory to make sure they include all items and that these items are appropriately priced. Accuracy in your bottom line Retailers and wholesalers can verify the accuracy of their gross profit figures pretty easily.