Chart of Accounts Merchandising Company

Nature of Merchandising Business
        • Revenue activities of a merchandising business involve the buying and selling of merchandise.   They purchase merchandise which is resold to customers.
        • Comparison to Service Business
|Service Business                                                 |Merchandising Business                                           |
|Fees earned                                                       |Sales                                                             |
|Less Operating expenses                                           |Less Cost of merchandise sold                                     |
|=Net income                                                       |=Gross Profit                                                     |
|                                                                 |Less Operating expenses                                           |
|                                                                 |=Net Income                                                       |


        • New Accounts on the Income Statement
              o SALES – revenues collected from the sale of merchandise
              o COST OF MERCHANDISE SOLD – the purchase price plus incidentals of merchandise available for resale
              o GROSS PROFIT – Sales – COMS


INCOME STATEMENT


Gem City Music


Income Statement


For the Year Ended December 31, 20—

Revenue from sales:
Sales                               $189,300
Less: Sales returns and allowances $ 1,700
Sales discounts 500 2,200
Net sales                     $187,100
Cost of merchandise sold XXXX 100,000
Gross profit                       $ 87,100
Operating expenses:
Selling expenses:
Sales salaries expense $17,700
Administrative expenses:
Rent expense $     7,800
Office salaries expense   22,550
Depreciation expense—office equipment     2,800       33,150
Total operating... [continues]

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