1 / 7

Accounting for a Merchandising Business

Accounting for a Merchandising Business. Required Reading: Chapter 11. Terms. Service Business – Business that sell services rather than goods. Example: Dentist, Roofer, Travel Agent. To this point in the course, we have only looked at service businesses.

dayo
Télécharger la présentation

Accounting for a Merchandising Business

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Accounting for a Merchandising Business Required Reading: Chapter 11

  2. Terms • Service Business – Business that sell services rather than goods. Example: Dentist, Roofer, Travel Agent. To this point in the course, we have only looked at service businesses. • Merchandising Business – Business that buys goods and then sells them at a profit. Example: Clothing Store, Car Dealer.

  3. Merchandising Terms • Manufacturer – A business that converts raw materials to finished goods. • Wholesaler – A business that buys finished goods from a manufacturer and sells them to retailers. Otherwise called a “distributor” or a “middleman”. • Retailer – A business that buys finished goods from wholesalers and sells them to the public.

  4. Service vs. Merchandising • Services are not tangible. Therefore, there is no inventory kept. Once the opportunity to sell a service is past, it is gone forever. • Merchandise is tangible. Therefore, inventory that is not sold today can be sold at a later point, even if that means taking a reduced price.

  5. Therefore….. • Merchandise inventory has value and it is owned – it must be accounted for as an ASSET on the BALANCE SHEET AND… • Merchandise inventory represents an outflow of resources to produce revenue, so it must be accounted for on the INCOME STATEMENT.

  6. Inventory Beginning Inventory + Merchandise Purchased = Total goods available for sale - Merchandise Sold = Ending Inventory The inventory figure here will go on the balance sheet as a current asset.

  7. AND… Cost of beginning inventory + Cost of merchandise purchased - Cost of ending inventory = Cost of merchandise sold This figure will go to the income statement in a new section called “Cost of goods sold”.

More Related