Question

1. What is a merchandise company?

2. Describe the difference between wholesalers and retailers?

3.Describe the difference(s) between the periodic and perpetual inventory accounting system?

4.What is gross profit percentage? How is it used as an indicator of profitability?

Answer 1

SOLUTION:-

Merchandise company:

• It is a company that buys goods and then resells them for a higher price than yhey were purchased.

Difference between wholesalers and retailers:

• Wholesalers buys goods from manufacturers and sells goods to retailers whereas retailers buys from wholesalers and sells goods to the consumer.

Difference between periodic and perpetual inventory accounting system:

• In periodic inventory occasional physical count of inventory is done to determine the closing price and cost of goods sold where as in case of perpetual inventory continual or real time balances of the inventory is tracked.

Gross profit percentage :

• It is the percentage to know the financial health and profitability of the company after accounting for the cost of sales and is calculated by dividing the gross profit of the company by its net sales.
• It is used as an indicator of profitability because it is based on gross profit of the company

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