What accounting activities make a merchandising business differ from a service business?

What accounting activities make a merchandising business differ from a service business?

How is the accounting cycle different for a merchandising operation,

as compared to a service business? How do the asset, revenue and

expense accounts differ? How does the multi-step income statement

differ from a single step? Which format is better?

The primary difference between a merchandising and a service-based business is the

presence of inventory. Merchandising businesses sell goods to customer, whereas service-

based businesses do not. The companies' financial statements, including the income

statements, must reflect this difference.

Both may hire employees; both may need equipment to be in business; both types of

business structures have customers who pay for goods or services. The main difference

between a merchandising company and a service industry company is that the

merchandising company must stock inventory.

In case of merchandise business, closing inventory is maintained and is shown in current

assets of the balance sheet. In the income statement, opening inventory is maintained at

the debit side of income statement & closing inventory is maintained at credit side of income

statement. However in case of service no such inventory is maintained.

Revenue & expense account differ with kind of business it is. (For ex: in a service industry

revenue is booked when service is provided & in merchandise industry revenue is booked

when goods are sold.)

A single-step income statement gives a simple accounting of a business's net income,

whereas a multi-step income statement follows a three-step process to calculate net

income, separating operational from non-operational revenues and expenses.

The multi-step income statement uses three different accounting formulas to arrive at the

net income:

1. GROSS PROFIT = NET SALES COST OF GOODS SOLD

Cost of goods sold is subtracted from net sales. This gives the gross profit.

2. OPERATING INCOME = GROSS PROFIT OPERATING EXPENSES

Operating expenses are subtracted from gross profit. This gives you the operating income.

3. NET INCOME = OPERATING INCOME + NON-OPERATING ITEMS

Operating income is added to the net non-operating revenues, gains, expenses and losses.

This final figure gives the net income or net loss of the business for the reporting period.

A single-step income statement presents the revenue, expenses and ultimately the profit or

loss generated by a business, but it reports on this information by using just one equation to

calculate profits. The equation used in a single-step income statement is:

Net Income = (Revenues + Gains) (Expenses + Losses)

How does a merchandising business differ from a service business?

A merchandising company engages in the purchase and resale of tangible goods. Service companies primarily sell services rather than tangible goods. Income statements for each type of firm vary in several ways, such as the types of gains and losses experienced, cost of goods sold, and net revenue.

Is there a difference between merchandising business and service business in the accounting cycle?

Both types of companies have the same accounting cycle. Transactions are posted in the general journal, and then the amounts are posted to the relevant general ledger accounts.

How do the activities of manufacturers merchandisers and service business differ?

A manufacturing company uses labor and other inputs to transforms raw materials into finished product and then sells the product, like a merchandising company. A service company, on the other hand, does not produce/sell products, instead it provides service.

Which accounts are used in a merchandising business but not in a service firm Brainly?

Answer. Explanation: Merchandising companies will have an asset for inventory, whereas service companies do not. This listed as a current asset.