Chapter 5 - Merchandizing operations. This chapter include objectives: Identify the differences between service and merchandising companies, prepare entries for purchases under a perpetual inventory system, prepare entries for sales under a perpetual inventory system,. | CHAPTER 5: MERCHANDIZING OPERATIONS LO 1: Identify the differences between service and merchandising companies. LO 2: Prepare entries for purchases under a perpetual inventory system. LO 3: Prepare entries for sales under a perpetual inventory system. LO 4: Prepare a single-step and multiple-step income statement. LO 5: Calculate the gross profit margin and profit margin. LO 6: Account for and report inventory in a periodic inventory system (Appendix 5A). LEARNING OBJECTIVES Differences Between Service and Merchandising Companies Service companies perform services as their primary source of revenue Merchandising companies buy and sell inventory (. Loblaws): Retailers sell to consumers Wholesalers sell to retailers Manufacturers produce goods for sale to wholesalers of others Operating Cycle The time it takes to go from cash to cash in producing revenues Longer for a merchandising company that for a service company: Merchandise must first be purchased before it can be sold Adds an . | CHAPTER 5: MERCHANDIZING OPERATIONS LO 1: Identify the differences between service and merchandising companies. LO 2: Prepare entries for purchases under a perpetual inventory system. LO 3: Prepare entries for sales under a perpetual inventory system. LO 4: Prepare a single-step and multiple-step income statement. LO 5: Calculate the gross profit margin and profit margin. LO 6: Account for and report inventory in a periodic inventory system (Appendix 5A). LEARNING OBJECTIVES Differences Between Service and Merchandising Companies Service companies perform services as their primary source of revenue Merchandising companies buy and sell inventory (. Loblaws): Retailers sell to consumers Wholesalers sell to retailers Manufacturers produce goods for sale to wholesalers of others Operating Cycle The time it takes to go from cash to cash in producing revenues Longer for a merchandising company that for a service company: Merchandise must first be purchased before it can be sold Adds an additional step to the cycle Income Measurement Process Revenue: Sales revenue (from the sale of merchandise): the main source Expenses are divided into two categories: Cost of goods sold: total cost of merchandise sold in a period Operating expenses: incurred in the process of earning sales revenue Gross profit = Sales revenue less cost of goods sold Income Measurement Process for a Merchandising Company Inventory Systems Flow of costs for a merchandising company: Beginning inventory + purchases = cost of goods available for sale Once sold, these costs are assigned to cost of goods sold Goods left over are ending inventory One of two systems is used to account for inventory and cost of goods sold: Perpetual inventory system Periodic inventory system Perpetual Inventory System Detailed records are kept for the cost of each product purchased and sold These records are updated continuously (perpetually) for purchases and sales A physical count is done at least once a year to adjust .
