Quiz 5: Accounting for Merchandising Businesses

Business

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A merchandising business differs from a service business in multiple ways. First, merchandising involves the buying and selling of goods while a service business involves providing services to customers for a fee. Second, the income statement for a merchandising business deducts the cost of the goods from the sales to determine gross profit. After that it then deducts operating expenses to determine net income. A service business only deducts operating expenses from fees earned. There is no cost of goods sold for them.

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