When a bullet is fired upward vertically, it gains potential energy.

Explanation:
When a bullet is fired vertically upward, it experiences various changes in its energy. Let's break down the process and understand why it gains potential energy.

Initial state:
- The bullet is at rest on the ground, so its initial kinetic energy is zero.
- It has a certain mass and is affected by gravity, so it has potential energy due to its position above the ground.

Acceleration:
- When the bullet is fired, an explosion occurs in the gun's chamber, creating a high-pressure gas that propels the bullet forward.
- As a result, the bullet experiences an acceleration in the upward direction due to the force exerted by the expanding gases.
- This acceleration is caused by the gunpowder explosion and the expanding gases pushing the bullet out of the gun barrel.

Velocity and speed:
- As the bullet moves vertically, it gains speed due to the acceleration imparted by the propelling force.
- The bullet continues to accelerate until the upward force applied by the propelling gases is balanced by the downward force of gravity.
- At this point, the bullet reaches its maximum velocity, also known as the terminal velocity. It is the highest speed the bullet can achieve while moving upward against the force of gravity.

Potential energy:
- As the bullet moves upward, it gains height, increasing its distance from the ground.
- The potential energy of an object depends on its height and its mass. In this case, the bullet's mass remains constant, but its height above the ground increases.
- Consequently, the bullet gains potential energy due to its increased distance from the ground.

Conclusion:
When a bullet is fired vertically upward, it gains potential energy as it moves higher against the force of gravity. The initial kinetic energy is negligible compared to the potential energy gained during the ascent.