What is difference between a merchandising company income statement and manufacturing company income statement?

Answer 1

 Merchandising companies do not calculate the raw materials placed in production or cost

of goods manufactured.

 Merchandisers purchase goods from suppliers instead of manufacturing goods. The cost

of these purchases from suppliers is often called net purchases in the income statement, in

contrast to cost of goods manufactured in a manufacturer’s income statement. The net

purchases line consists of purchases, purchases returns and allowances, purchases

discounts, and freight in.

 Merchandisers do not use the schedule of cost of goods manufactured (and related

schedule of raw materials placed in production).

 Merchandisers use an account called merchandise inventory, or simply inventory, instead

of finished goods inventory. This reflects that merchandisers do not produce goods.

Answer 2

A traditional income statement would differ depending on whether a business was service-oriented, merchandiser or manufacturer. The manufacturing company transforms raw material into finished goods through the use of labor and factory facilities and a merchandising company, such as a retail furniture store which buys finished furniture and sells it in the same form i.e. sells the goods it buys without changing the basic form. The income statement which is prepared by a merchandising concern needs no calculations of cost of goods manufactured. But the income statements prepared by the manufacturing concern require the calculations for the cost of goods manufactured. So the financial statements prepared by a manufacturing company are more complex than the statements prepared by a merchandising company. The manufacturer company involves many costs that the merchandisers do not have. It is clear that the manufacturing company will have a more complex and varied cost components vs. a merchandiser and a service organization.

Answer 3

In merchandising company income statement there is no detailed cost of goods sold statement is prepared while in manufacturing company income statement detailed cost of goods sold statement is prepared.

Answer 4

what are the major differences in preparing the financial statements for a service business and a merchandising business?

Answer 5

Ans: Merchandising is selling and purchasing while manufacturing means making.