The basic differences between the financial statements of a merchandising business and a service business include reporting cost of merchandise sold on the income statement and the : A. owner's equity section of the balance sheet
B. other income section of the income statement
C. inclusion of merchandise inventory on the balance sheet as a current asset D. inclusion of an owner's equity statement
The primary difference in handling inventory, accounts payable and accounts receivable. In a merchandising company you will probably have inventory that needs to be valued. This can be done FIFO or LIFO (first in first out, or last in first out) basis. The asset that your inventory represents can be offset by your accounts payable if you purchased inventory on account. At the end of the year for tax purposes you have to account for the change in your inventory value. In addition in a mechanizing company you may have to handle local sales taxes and such. In a service company there is no inventory and normally no local taxes on services sold.
Distinguish the activities of a service business from those of a merchandising business. The primary differences between a service business and a merchandising business relate to revenue activities. Merchandising businesses purchase merchandise for selling to customers. On a merchandising...