The Accounting Cycle in a Merchandising Corporation: Introduction
This section deals with accounting for a merchandising business. A merchandising business buys merchandise at wholesale and sells it at retail. Merchandise sold is reported as sales revenue, and its cost is reported as the cost of merchandise sold. Merchandise purchased for resale is called merchandise inventory, and is reported as a current asset on the balance sheet. Merchandising involves the exchange of goods for an agreed sum of money. Recording the sale of goods and related accounts receivable forms an important activity in an organization. It is essential to properly document all sales-related documents. The collection and payment of sales taxes is also accounted for in this documentation.
This section will provide an overview of wholesaling and retailing, and basic concepts on how to compute the accounts for a merchandising business.