In: Accounting
What are the CLOSING PROCEDURES of a service based business and a merchandising business.
The main difference between a service industry company and a merchandising company is that the latter must stock inventory. Cost of Goods Sold will not be necessarily for a service based business but is necessary for the merchandising business. Both use the accounting equation: Assets = [Liabilities + Owner's Equity. For the closing procedures, whether monthly, quarterly or annually, accounts in the general ledger which needs the adjusting will be adjusted and the financial reports are prepared.
Both service based business and a merchandising business will be preparing Trial Balance for the period in beginning; an Adjusted Trial Balance at the period end after adjustments; the Income Statement, making the B/S and Statement of Owner's Equity, and the closing Trial Balance. The only difference will be the Cost of Goods Sold will be prepared only by the merchandising business because service based business don't deal with a physical inventory