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Unformatted text preview: . This expense is directly related to the revenue recognized from the sale of goods. Illustration 5-1 shows the income measurement process for a merchandising company. The items in the two blue boxes are unique to a merchandising company; they are not used by a service company. Income measurement process for a merchandising company Operating Cycles The operating cycle of a merchandising company ordinarily is longer than that of a service company . The purchase of merchandise inventory and its eventual sale lengthen the cycle. Illustration 5-2 contrasts the operating cycles of service and merchandising companies. Note that the added asset account for a merchandising company is the Merchandise Inventory account. Operating cycles for a service company and a merchandising company...
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This document was uploaded on 11/03/2011 for the course ACCOUNTING ac 201 at Montgomery.
- Spring '11