To this point, examples of business operations have involved the sale of services. This chapter introduces business operations based on the purchase and resale of goods. For example, Canadian Tire and Walmart each purchase and resell goods—such businesses are known as merchandizers. The accounting transactions for merchandizing companies differ from those of service-based businesses. Chapter 5 covers accounting for transactions of sales of goods on credit and related cash collections by merchandizing firms, and transactions involving purchases and payments for goods sold in the normal course of business activities.
Learning Objectives
LO1 – Describe merchandizing and explain the financial statement components of sales, cost of goods sold, merchandize inventory, and gross profit; differentiate between the perpetual and
periodic inventory systems.
LO2 – Analyze and record purchase transactions for a merchandizer.
LO3 – Analyze and record sales transactions for a merchandizer.
LO4 – Record adjustments to merchandize inventory.
LO5 – Explain and prepare a classified multiple-step income statement for a merchandizer.
LO6 – Explain the closing process for a merchandizer.
LO7 – (Appendix) Explain and identify the entries for purchase and sales transactions in a periodic inventory system.
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