BUSI 1101 Lecture Notes - Lecture 7: Perpetual Inventory, Gross Profit, Profit Margin
18 Mar 2018
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Document Summary
Service companies perform services as their primary source of revenue. Merchandising companies buy and sell inventory: retailers sell to consumers, wholesalers sell to retailers, manufacturers produce goods for sale to wholesalers of others. The time it takes to go from cash to cash in producing revenues. Longer for a merchandising company than for a service company: merchandise must first be purchased before it can be sold, adds an additional step to the cycle. Revenue: sales revenue (from the sale of merchandise), the main source. Expenses are divided into two categories: cost of goods sold, total cost of merchandise sold in a period, operating expenses: Incurred in the process of earning sales revenue: = sales revenue cost of goods sold. Flow of costs for a merchandising company: beginning inventory + purchases = cost of goods available for sale, once sold, these costs are assigned to cost of goods sold, goods left over are ending inventory.
