Merchandising Operation

What is the primary purpose of accounting in merchandising operations?

• To manage inventory levels without financial reporting.

• To calculate employee salaries in merchandising operations.

• To track and report financial performance in buying and selling goods.

Define the term 'cost of goods sold' (COGS) in the context of merchandising.

• Cost of Goods Sold (COGS) includes all operating expenses of a business.

• Cost of Goods Sold (COGS) refers to the total revenue generated from sales.

• Cost of Goods Sold (COGS) is the total cost of purchasing or producing the goods that a company sells

How do you calculate the gross profit for a merchandising business?

• Gross Profit = Cost of Goods Sold - Total Sales Revenue

• Gross Profit = Total Sales Revenue x Cost of Goods Sold

• Gross Profit = Total Sales Revenue - Cost of Goods Sold

What are the key differences between a perpetual and periodic inventory system?

• Perpetual systems require physical counts; periodic systems do not. both of them are expensive.

• Perpetual systems provide real-time inventory tracking; periodic systems update inventory at intervals.

• Perpetual systems only track sales, while periodic systems track purchases.

Explain the importance of inventory management in merchandising operations.

• Inventory management has no impact on customer satisfaction. but primarily focused on employee training

• Inventory management is only necessary for large businesses not for small.

• Inventory management is essential for maintaining optimal stock levels, reducing costs, and ensuring product availability.

What is the role of accounts receivable in merchandising accounting?

• Accounts receivable is used to manage inventory levels.

• Accounts receivable records cash sales only.

• Accounts receivable tracks credit sales and customer payments in merchandising accounting.

• Accounts receivable is responsible for supplier payments.

Describe how sales returns and allowances affect financial statements.

• Sales returns and allowances decrease total revenue and affect accounts receivable or cash balance.

• Sales returns and allowances only affect the cash flow statement, not the balance sheet.

• Sales returns and allowances increase total revenue and affect inventory levels.

What is the impact of discounts on the revenue of a merchandising company?

• Discounts only benefit the customers and not the company. Discounts have no effect on sales volume or revenue.

• Discounts can increase sales volume but may decrease total revenue depending on the balance between volume and price reduction.

• Discounts always increase total revenue regardless of sales volume.

How do merchandising companies report their inventory on the balance sheet?

• Inventory is reported as a long-term asset on the balance sheet.

• Inventory is reported as an expense on the income statement.

• Inventory is reported as a current asset on the balance sheet.

What are the common financial ratios used to analyze merchandising operations?

• Price-to-Earnings Ratio

• Debt-to-Equity Ratio

• Gross Profit Margin