Financial Statement Essay

709 WordsJul 31, 20143 Pages
The difference between financial statements of a service business to merchandising business is that Merchandising business deal with the resale of items. Typically, merchandising companies are referred to as retailers or wholesalers. Wholesale companies sell products to retailers. Retailers, in turn, sell the product to the end consumer at a higher price than they paid when they purchased it. Merchandising companies usually have two types of expenses -- expenses related to the products they are selling, called cost of goods sold, and expenses related to the day-to-day operations of the business. The latter would include rent, utilities, and office supplies and staff salaries. While Service business also deal in products. However, their products are usually intangible. Service companies provide services for their customers. This type of company includes law firms, accounting firms, salons and spas, among others. For example, a service product is a tax return prepared by an accounting firm. A product for a salon could include a haircut or manicure. Typically, service business have only expenses relating to the daily operations of the business. Definition sale is the act of selling a product or service in return for money or other compensation. Sales return allowance A contra revenue account that reports 1) merchandise returned by a customer, and 2) the allowances granted to a customer because the seller shipped improper or defective merchandise. This of course will reduce the seller's accounts receivable and is subtracted from sales (along with sales discounts) to arrive at net sales Sales discount is subtracted from gross sales in arriving at net sales. Net sales are operating revenues earned by a company for selling its products or rendering its services. . Cost of goods sold or COGS refer to the carrying value of goods sold during a

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