merchandising business

- an enterprise that buys and  

 sells goods to earn a profit; engaged in a  

 buying and selling of products. 

Merchandising Business

- refers to goods that are held for sale to  

customers in the normal course of business. This 

includes goods held for resale.

Merchandise

A merchandiser‘s primary source of revenue is

sales revenue or sales

is the process of leading a customer to a sale

merchandising

, refers to  a consumer actually selecting a product and completing a purchase transaction.

sales

– the total cost of merchandise sold during the period

Cost of goods sold (COGS)

- expenses incurred in the process of earning sales revenue that are  deducted from gross profit in the income statement. Examples are sales salaries and insurance  expenses

Operating expenses (OP)

is equal to Sales Revenue less the Cost of Goods Sold.

Gross profit (GP)

Merchandising Company operating cycle (cash to cash) involves: 

1. buy merchandise inventory 

2. sell inventory 

3. obtain Accounts Receivable 

4. receive cash

two methods  of accounting for inventory.

• perpetual inventory system

• periodic inventory system

— Detailed records of the cost of each item are maintained,  and the cost of each item sold is determined from records when the sale occurs.

Perpetual Inventory System

  — Cost of goods sold is determined only at the end of an  accounting period.

Periodic Inventory System

The two most common arrangements for freight costs are

FOB SHIPPING POINT  

AND FOB DESTINATION. 

 • Goods placed free on board (FOB) the  

 carrier by seller. 

 • Buyer pays freight costs.

FOB Shipping Point: 

 • Goods placed free on board (FOB) at buyer‘s business. 

 • Seller pays freight costs. 

 FOB Destination