Accounting for Merchandising Businesses

A type of business that involves buying and selling of goods.

• Merchandising

• Service

• Manufacturing

It is the product or good being sold.

• Supplies

• Cash

• Inventory

• Prepaid Expense

The original cost of the product sold.

• Purchases

• Merchandise Inventory

• Cost of Goods Sold

• Sales

Gross profit equals the difference between net sales and

• cost of sales plus operating expenses

• cost of good sold

• operating expenses

• profit

Result when expenses are LESS THAN the total revenue for a time period.

• Net income

• Net loss

• Gain on sale

• Loss on sale

If gross profit is $55,000 and cost of goods is $125,000, how much are total net sales?

It is a major expense of the merchandising business.  It is the cost of the merchandise that the company sold to its customers.

• Merchandise inventory

• Cost of Goods Sold

• Freight in

• Sales Discounts 

Obtained by deducting the cost of goods sold from the net sales.

• Net Income

• Gross Profit

• Earnings Before Tax

• Operating Income

These are ordinary and necessary expenses in the day-to-day running of the operations of the business. Examples include utilities, salaries, rent, etc.

• Cost of Sales

• Cost of Goods Sold

• Operating Expenses

• Purchases 

If a retailer buys goods costing $2,000 and later sells them at a 25% markup, what is the selling price?

• 2,500

• 2,250

• 2,300

• 2,525