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10.1 The Merchandising Business

10.1 The Merchandising Business. Inventory. Some businesses sell services, others sell merchandise (tangible) Goods to be sold to customers is called merchandise From the perspective of a retailer, merchandise is either: SOLD – “Cost of Goods Sold” NOT SOLD – “Merchandise Inventory”.

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10.1 The Merchandising Business

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  1. 10.1 The Merchandising Business

  2. Inventory • Some businesses sell services, others sell merchandise (tangible) • Goods to be sold to customers is called merchandise • From the perspective of a retailer, merchandise is either: SOLD – “Cost of Goods Sold” NOT SOLD – “Merchandise Inventory”

  3. Important Terms • Beginning Inventory – This is the merchandise that is available for selling, on the first day of the fiscal period • Merchandise Purchased – This is the goods that were bought over the course of the fiscal period to be inventory (sold to customers) • Merchandise Sold – The goods that were sold to customers

  4. Key Equation Beginning + Goods - Cost of Goods = Ending Inventory Purchased Sold Inventory

  5. Other Points • At least once per fiscal period, it is necessary to actually count, by hand, the inventory that the business owns: Physical Inventory • Merchandise Inventory is an Asset • COGS is on the Income Statement • NEW – the Income Statement is more complex, there is a Cost of Goods Sold Section • NEW – Gross Profit = Sales – COGS • Interesting Point – The Ending Inventory of one year is the next years’ Beginning Inventory • See Page 399 of your text for a good example

  6. Which of the Below Businesses are Merchandisers?

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