Chapter_5_Notes

Chapter_5_Notes - Chapter 5 Objectives 1 Explain the difference between a Service Company and a Merchandising company 2 Learn how to record

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Chapter 5 Objectives 1. Explain the difference between a Service Company and a Merchandising company. 2. Learn how to record Purchases under a Perpetual inventory system . 3. Learn how to record Sales Revenue under a Perpetual inventory system . 4. Distinguish between a Single-Step and a Multi-Step income statement . 5. Learn factors affecting a company’s Profitability .
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Service Company v. Merchandising Company Merchandising Company 1. Primary source of revenues is the sale of merchandise. The revenue account is Sales Revenue or Sales . 2.Expenses of a merchandising company are divided into two categories: a. Cost of Goods Sold – the total cost of merchandise sold within the period. b. Operating Expenses – selling and administrative expenses. 3. Inventory Account – Current asset on the Balance Sheet and a component of Cost of Goods Sold. 4. Longer Operating Cycle – The time it takes to turn cash back into cash . To convert cash into inventory, inventory into an account receivable and the account receivable back into cash.
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This note was uploaded on 04/18/2008 for the course BUS 210 taught by Professor Schmeltz during the Spring '08 term at SUNY Stony Brook.

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Chapter_5_Notes - Chapter 5 Objectives 1 Explain the difference between a Service Company and a Merchandising company 2 Learn how to record

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