10.1 The Merchandising Business

Inventory Some businesses sell services, others sell merchandise (tangible) Goods to be sold to customers is called merchandise From the perspective of a retailer, merchandise is either: SOLD – “Cost of Goods Sold” NOT SOLD – “Merchandise Inventory”

Important Terms Beginning Inventory – This is the merchandise that is available for selling, on the first day of the fiscal period Merchandise Purchased – This is the goods that were bought over the course of the fiscal period to be inventory (sold to customers) Merchandise Sold – The goods that were sold to customers

Key Equation Beginning + Goods- Cost of Goods = Ending Inventory Purchased Sold Inventory

Other Points At least once per fiscal period, it is necessary to actually count, by hand, the inventory that the business owns: Physical Inventory Merchandise Inventory is an Asset COGS is on the Income Statement NEW – the Income Statement is more complex, there is a Cost of Goods Sold Section NEW – Gross Profit = Sales – COGS Interesting Point – The Ending Inventory of one year is the next years’ Beginning Inventory See Page 399 of your text for a good example

Which of the Below Businesses are Merchandisers?