Studied by 1 person
What does a merchandising company do?
Buy and sell goods
What is the name of merchandisers who sell goods directly to consumers?
Retailers
What is the name of merchandisers who sell goods to retailers?
Wholesalers
What is the primary source of revenue for merchandisers?
Sales revenue/sales (sale of merchandise)
What are the expenses accounts that merchandisers have?
Cost of Goods Sold and Operating Expenses
What is the income measurement process for merchandisers?
Sales Revenue (Less) - Cost of Goods Sold = Gross Profit
Gross Profit (Less) - Operating Expenses = Net Income/Loss
What are two accounts used by merchandisers not used by service companies?
Cost of Goods Sold and Gross Profit
(T/F)The operating cycle of a merchandising company is longer than that of a service company?
True
Compare the operating cycle of service companies to the operating cycle of merchandising companies
Operating cycle of Service companies =
Available Cash → Perform Services → Accounts Receivable → Receiving of Cash
Operating Cycle of Merchandising companies =
Available Cash → Buy Inventory → Sell Inventory → Accounts Receivable → Receiving of Cash
What is the general flow of costs in a merchandising company?
Beginning inventory + Cost of Goods Purchased
= Cost of Goods Available for Sale → Cost of Goods Sold Or Ending Inventory
(As goods are sold, they are assigned to Cost of Goods Sold and those not sold are assigned to Ending Inventory)
What is a perpetual system of inventory?
A perpetual system of inventory is one which continually (perpetually) keeps track of current inventory by calculating the COGS every single time a sale is made. Companies with high value products and frequent sales ( Ford cars and supermarkets) use this system.
What is a periodic system of inventory?
A periodic system of inventory is a system which does not keep constant track of inventory and only calculates COGS at the end of period. This is usually done manually and for companies with low value products and infrequent sales.
