Basic Accounting Assignment Discussion Paper

Merchandise Operation Company ora)These companies refers to take place form of activities such as purchasing,selling,collecting and payment. b)As they are in cyclical in nature,which helps the operations to improve cash flow. c)Offering attractive credit terms to recognized buyers,collecting your credit sales and paying up promplty keeps a smooth functioning of merchandise operation companies. 2. Merchandise Operation VS Service Operations Merchandise Service a)Merchandise are form of activities such as purchasing,selling,collecting and payment. a) services are economic activities that produce time, place, form, or psychological utility b)Merchandising success relies on the correct product mix, adequate inventory, fresh food and a clean and neat appearance. b)Consumerization and service experience is a key factor in service operation c)Merchandising involves transfer of tangible goods are transfered. c)Service operations provides asevices to the customer,no physical goods transfered. d)Efficient merchandising well balanced stocked with inventory that your customers want to buy d)Service Operational efficiency is the capability of an enterprise to deliver to its customers in the most cost-effective manner possible while still ensuring the high quality of its products, service and support. 3.Wholesaler a)A Wholesaler refers to a person who buys products and commodities in large scales and sells such products to the retailer in bulk quantities. b)They give the retailers a chance to purchase goods in bulk with a lower price instead as they would have bought them as single items,which makes benefitible . c)Wholesaling is the business of distributing goods in bulk to other businesses that repackage them in smaller quantities for sale directly to consumers which are not usually manufacturers Basic Accounting Assignment Discussion Paper.

Their business is distributing the end products. 4. Retailer a)Retail is the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit as satisfaction of demand by retailers identified through a supply chain. b)A manufacturer puts all efforts to look for raw materials, labor and produce a finished product. A retailer will then need to sell the goods to the consumer at a recommended price. c)To maximize customer satisfaction, where a retailer has to offer goods to the buyer on credit, they need to consider risk factors so as not to accumulate so many bad debtsand most important, the product quality needs to be at the forefront of a merchant’s objectives. 5. Manufacturer a)A manufacturer is a person or company that produces finished goods from raw materials by using various tools, equipment, and processes, and then sells the goods to consumers, wholesalers, distributors, retailers, or to other manufacturers for the production of more complex goods. b)Modern manufacturers are mostly associated with effective mass production. Technological advancements enable the mechanization of production processes, as well as improve overall efficiency and productivity. c)The success manufacturers mostly depends on their ability to forecast the market demand correctly. 6. Cost of Goods Sold. a)Cost of Goods Sold (COGS) is the cost of a product to a distributor,manufacturer or retailer. Sales revenue minus cost of goods sold is a business’s gross profit,which is carrying value of goods sold during a particular period. b)To find the cost of goods sold during an accounting period, the formula is: COGS = Beginning Inventory + Purchases During the Period – Ending Inventory c)You must know your COGS,because i)it helps to set prices that leave you a healthy margin ii)it helps to identify business profit. 7.FOB Shipping Point a)The term FOB shipping point is a contraction of the term “Free on Board Shipping Point.”,it refers to buyer takes delivery of goods being shipped to it by a supplier once the goods leave the supplier’s shipping dock. b)The seller pays for transportation and loading costs, and clears the goods for export. The seller also takes responsibility for loading the goods onto the ship. Once the goods are onboard, risk and costs are divided between the buyer and the seller Basic Accounting Assignment Discussion Paper.

c)FOB is the most frequently recommended term of sale,it allows for greater control over both the freight itself and the freight costs. 8.FOB Destination Point a)FOB (Freight On Board) Destination’ is a shipping term that means that the legal title to the goods remains with the seller until the goods reach the location of the buyer b)The FOB destination the location where the actual sale of goods occurs and ownership changes hand from the seller to the buyerwhich is important for the accounts, as it dictates when the amounts are entered in the records c)With terms of FOB destination the title to the goods usually passes from the buyer to the seller at the destination. 9.Periodic System of Inventory Vs Perpetual Sysyem of Inventory The periodic system uses an occasional physical count to measure the level of inventory and the cost of goods sold (COGS). By contrast, the perpetual system keeps track of inventory balances continuously, with updates made automatically whenever a product is received or sold It relatively suite to small and meduim industries It relatively suites to large business Introduction of technology is relatively difficult due to its cost. Due to in presence of large business, technological upgradation provides better performance in results it will take time to confirm they are error free. Easily can identify inventory related errors 10.Income Statements for Merchandising vs.

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Service Companies A merchandising company engages in the purchase and resale of tangible goods. Service companies primarily sell services rather than tangible goods inventory is a large percentage of the asset’s category for a merchandising company service businesses’ assets tend to be weighted toward accounts receivable a merchandiser might decide to redecorate a retail store and sell off fixtures for a profit A service company might have a one-time gain from the sale of a patent Manufacturing companies are less certain since a decrease in net revenue could be an increase in expenses or a decrease in revenues. Service companies do not typically have enormous expense accounts, meaning that fluctuations in net revenue are almost entirely a function of generating Refer to the above step for the solution

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