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BENTAHAN

Chapter 1: Merchandising Business


3 MAJOR TYPES OF BUSINESS ENTERPRISE:
o Service Enterprise- this is a business engaged in selling services
to their clients or customers.
o Merchandising Business- a business engaged in buy and sell
activities. They buy their products from the manufacturers and sell
them to customers at a higher price.
Wholesaler- buys directly from manufacturers then sells to
retailers
Retailer- buys from wholesalers then sells to end-customers
o Manufacturing Enterprise- the ones who make the products
sold by the merchandisers.

NORMAL OPERATING CYCLE


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The average length of time from the spending of cash to acquire the
goods and until this amount of cash will be collected from customers
because of the sale of goods to them.

For the receivables from the NOC, it is not important whether when will
it be collected from the customer.

All trade accounts receivable should be classified into current assets.

INCOME STATEMENT FOR A MERCHANDISING BUSINESS:


Purchases
+ Freight-in
Gross Purchases
- Purchase Returns & Allowances
- Purchase Discounts
Net Purchases
+ Beginning Inventory
Cost of Goods Available for Sale
- Ending Inventory
Cost of Goods Sold
Sales

- Sales Returns and Allowances


- Sales Discount
Net Sales
- Cost of Goods Sold
Gross Profit
- Operating Expenses
Operating Income
+ Other Income
- Other Expenses
- Interest Expense
Net income before Tax
- Income Tax Expense
Net Income after Tax