The major factors which causes increase in gross profits is 'increased sales' and 'reduced cost of operation'. In case you wanted to know the factors which can wrongly increase the gross profits of an entity, consider this list.

1. Undervaluation of opening inventory.
2. Overvaluation of closing inventory.
3. Alteration of the basis of valuation of closing inventory.
4. Increase in the value of some of the items included in the opening inventory above cost.
5. Under-statement of opening inventory or overstatement of closing inventory.
6. Entry of fictitious purchases to boost up the profits.
7. Inclusion in the closing inventory of goods returned awaiting despatch to supplier.
8. Inclusion in the closing inventory of goods received for the sale on approval or on a consignment basis.
9. Treatment of goods sent out for sale on consignment basis as regular sales.
10. No provision or under-provision in the expenses accounts included in the Trading Account. For example, purchase may be understated; provision for outstanding wages or carriage inward may not have been made.
11. Wrong allocations of expenses, e.g., carriage inwards either in whole or in part may be wrongly taken to the Profit and Loss Account.