discussion 3 - A merchandising company's income statement...

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A merchandising company's income statement includes categories that service enterprises do not use. A single-step income statement for a merchandising company lists net sales under revenues and the cost of goods sold under expenses. The income statement of a merchandising company consists of Revenue, Expenses (related to the sales volume through the Cost of Goods Sold and General & Administrative Expense), which all result in Net Income. The income statement of a Service company consists of Service Revenue minus any Expenses related to that service, which results in Net Income. Inventory is a current asset. For small store, it is number one asset. For any medium or big retail or manufacturing business, it is very important asset. Based on ending inventory, the cost of goods sold is determined. CGS is figured by adding Beginning inventory to Purchases which is considered goods available for sale and the ending inventory is subtracted from goods available for sale. Ending inventory is the result of selling or using products during the period from the goods available for sale. If ending inventory is overstated, the cost of goods sold will be understated. Therefore, it is important to have accurate ending inventory value to be able to have accurate cost of goods sold whether we are talking about retail or manufacturing. Inventory refers to stocks of anything necessary to do business. These stocks represent a large portion of the business investment and must be well managed in order to maximize profits. If a company has too much inventory, it is wasting money -- tying up capital that could be better used elsewhere. But if it has not got enough, it risks losing business because a potential customer would rather shop elsewhere in order to get immediate delivery. That makes inventory control an important issue for managers and investors as well. Other assets that appear in the balance sheet are called long-term or fixed assets because they're durable and will last more than one year.
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1) You are opening a small retail store in Duluth, Ga. Your primary business is to sell hair care products. The business has a high volume of inventory
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discussion 3 - A merchandising company's income statement...

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