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 expenses 50,850
Income from operations