Concept explainers
Merchandising Companies: Merchandising companies refer to those companies which are dealing in sale of products to a retail buyer.
Service Companies: These are those companies which are engaged in rendering of different services instead of selling physical products. A good example of service company is a public accounting firm. They earn revenues by preparing tax returns, performing audit and asset services.
Perpetual Inventory System: The inventory system in which the inventory accounts are updated on each transaction of purchase or sale in inventory. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.
To identify: The additional accounts a merchandising company would use in comparing its accounts with that of a service company.
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FINANCIAL ACCT.FUND.(LOOSELEAF)
- Explain why a company might want to utilize the gross profit method or the retail inventory method for inventory valuation.arrow_forwardThe following information is taken from a companys records. Applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?arrow_forwardWhy do companies adopt the LIFO method of inventory costing? Your discussion should include the effects on the income statement and balance sheet.arrow_forward
- Using the perpetual inventory system, what account is debited when a business finds that its physical count of inventory is greater than the recorded amount?arrow_forwardWhat accounts are used to recognize a retailers purchase from a manufacturer on credit? A. accounts receivable, merchandise inventory B. accounts payable, merchandise inventory C. accounts payable, cash D. sales, accounts receivablearrow_forwardWhich of the following accounts is unique to a merchandising entity that uses the periodic inventory system? Cost of Goods Sold Merchandise inventory Purchases Transportation iNarrow_forward
- Describe a situation where a merchant would use the specific identification method for recording inventory costs. Walther L. M principles of accounting.arrow_forwardThe revenue account for a merchandising business is typically called ___________. Group of answer choices inventory sales. unearned revenue. fees earned. sales or sales of merchandise.arrow_forwardIs it necessary to do a physical count of inventory if the company is using a perpetual system? Why or why not? What sort of company would likely use a perpetual system? What sort of company would likely use a periodic system? (Provide specific examples).arrow_forward
- Which of the following accounts would not appear on a worksheet for a merchandising entity that uses the periodic inventory system? Purchases Cost of Goods Sold Sales returns and Allowances Transportation inarrow_forwardWhat is a periodic inventory system? What kind of businesses use periodic inventory systems?arrow_forward• Explain why there isn't there a "Cost of merchandise sold" expense for a service business. describe the difference between "Gross Profit" and "Net Income". If a company used a computerized accounting system (rather than a manual), are they more likely to use a perpetual OR periodic inventory system?arrow_forward
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