Principles of Financial Accounting · free preview
Merchandising versus Service Activities and Transactions
Merchandising businesses differ from service businesses by buying and reselling inventory, which adds a second layer of transaction activity around purchasing, stocking, and selling goods at a markup.
1. Two business models, one accounting core
Two business models, one accounting core
2. The operating cycle of a merchandiser
The operating cycle of a merchandiser
3. Why gross profit enters the vocabulary
Why gross profit enters the vocabulary
4. Transactions a merchandiser must record
Transactions a merchandiser must record
5. The defining difference
What most clearly distinguishes a merchandising business from a service business?
6. Gross profit location
Where does gross profit appear? Use the figures from the worked example in this lesson and state the result in the requested units.
7. Why inventory waits as an asset
Why are goods purchased for resale recorded as inventory rather than as an expense on the purchase date?
8. Operating cycle order
Which sequence best describes a merchandiser's operating cycle?
9. Merchandiser profit source
Complete the sentence. A merchandiser earns its profit from the ____ between the cost of goods and the price at which they are resold.
10. Goods held for resale
Give the one-word accounting term for goods purchased by a merchandiser and held for resale to customers.
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