Question

Would a traditional income statement differ depending on whether the business is a service organization, a merchandiser, or a manufacturer?

Answer 1

Yes, the traditional statement differ depending upon the business whether it is merchandiser, manufacturer etc.

A manufacturer produces goods from its raw material and other inputs and the goods produced are sold to customers. This represents cost of good sold which consist of raw material, direct labor and manufacturing overhead. The cost of good sold is presented in the income statement after Revenue.

A merchandise company has its cost of good sold as the amount of goods purchased from outside to resale this also includes additional expenditure which is needed to bring them to the location such as freight and insurance. So this cost is easy to calculate than the manufacturer cost. The cost of good sold is presented in the income statement after Revenue.

Service organization do not sell goods they sell services that means these companies do not have cost of good sold. The major expenses is labor expenditure.