Question

In compering the accounts of merchandising company with those of a the service company, what additional accounts would the merchandising company likely use, assuming it employs a perpetual inventory system

Answer 1

Merchandising company accounts and service company accounts:

The merchandising company activities are different from those of service companies significantly. A merchandising company generates revenue by selling the goods it acquired. A merchandiser may sell their products wholesale or retail manner. A service company generally sells its services like software consultancy to their clients who need such.

A merchandising company maintains some additional records that those maintained by a service providing company like sales, cost of goods sold records, merchandise inventory, sales returns, a net sales record, gross profit record, etc.

. The common accounting records of merchandising and service companies are like net profit, balance sheet, indirect expenses like administration expenses, human resource expenses, accounting expenditure, support services expenditure, etc.

Additional records shall be maintained by a merchandising company when It uses perpetual Inventory

system:

The merchandising company performs much variety of activities compared to those performed by a service company. A merchandising company deals with goods trading activities related to the goods it offers which require additional records maintenance like inventory management, sale returns, purchase return, etc.

The additional records maintained by a merchandising company using a perpetual inventory system may be summarized as under:

• Merchandising inventory

• Cast of goods sold

• Damage or loss of inventiry

• Sales return

• Purchase return

• Discounts or allowances etc