Merchandising Business and its accounting entries

TABLE OF CONTENT

1. MERCHANDISING BUSINESS
a. Examples
b. New Account on Income Statement
c. Income Statement of Merchandising Business

2. DIFFERENCE: MERCHANDISING, MANUFACTURING & SERVICE RENDERING BUSINESS
a. Service Business
b. Merchandise Business
c. Manufacturing Business

3. RECORDING SYSTEM OF MERCHANDISING BUSINESS
a. Perpetual Inventory System
i. Journal Entries
1. Purchases
2. Sales
3. Inventory Shrinkage Loss

b. Periodic Inventory System
i. Journal Entries
1. Purchases
2. Sale
3. Inventory Shrinkage Loss

ii. Calculation: Cost of Goods Sold under Periodic Inventory System

iii. Journal Entries
1. Ending Inventory Included
2. Ending Inventory Deducted

iv. Income Statement
c. Difference: Periodic and Perpetual Inventory System

MERCHANDISING BUSINESS
Business that buys finished goods and resells them.
Business which deals in inventory.
Business that sells physical goods or products to its customers.
Revenue activities of merchandising business involve the buying and selling of finished goods.

Examples:
WHOLESALER – Buy large quantities of merchandise from several different manufacturers and then resell this merchandise to many different retailers.
RETAILER – Business that sells merchandise directly to the public.

New Accounts on the Income Statement:
Sales
Cost of goods sold
Income statement of a merchandising business:

Business name
Income statement
For the year ended, December 31, 2013
Sales
$ 00000000
Cost of Goods Sold
$ 00000000
Gross Profit
$ 00000000
Expenses
$ 00000000
Net Income
$ 00000000

DIFFERENCE: MERCHANDISING, MANUFACTURING & SERVICE RENDERING BUSINESS
Service Business
This type of business provides services to its customers, it could be defined as selling your time, or also known as labor business. These type of businesses provide services to private and commercial clients. A few examples of service businesses are: accounting firms, physical therapy