What distinguishes a merchandising business from a service business? Can a business earn a gross profit but incur a net...

Question

Question

What distinguishes a merchandising business from a service business? Can a business earn a gross profit but incur a net loss? Explain.

Give an example of a merchandising business and service business.

business accounting

Answer 1

Answer #1

A merchandise business generates income by selling goods to its customers. However a service business produce income by providing services to their customers
Differences between merchadise business and service business
Details	Merchandise Business	Service Business
Revenue	Sales revenue	Service revenue
	example: Selling price of the inventory	Example: Fee received, interest received and rent received etc.
Expenses	Cost of goods sold and operating expences	only operating expences
	example: Rent, Office supplies, taxes, utilities, insurance etc.	example: Rent, Office supplies, taxes, utilities, insurance etc.

Business can lead to net loss even with gross profit if it's operating expenses are more than gross profit.

Example of merchandise business is tire manufacturing company and example of serive business it consultancy services.

Answer 2

Similar Homework Help Questions

Use the following information (in random order) from a merchandising company and from a service company....

Use the following information (in random order) from a merchandising company and from a service company. Kleiner Merchandising Company Accumulated depreciation $ 700 Beginning inventory 12,000 Ending Inventory 7,200 Expenses 2,150 Net Purchases 15,100 Net Sales 23,500 Krug Service Company Expenses $ 10, 200 Revenues 28,000 Cash 800 Prepaid rent 580 Accounts payable 200 Equipment 2,500 Required: a. Compute the goods available for sale, the cost of goods sold, and the gross profit for the merchandiser. Hint: Not all information...
As a merchandising company Lowes subtracts ______ from sales to disclose gross profit: a. losses on...

As a merchandising company Lowes subtracts ______ from sales to disclose gross profit: a. losses on investments b. selling expenses c. net income d. cost of merchandise sold
Calculate Net sales, Gross profits from sales and gross profit margin and profit and loss and...

Calculate Net sales, Gross profits from sales and gross profit margin and profit and loss and Terms are: Sales Sales Discounts (5 %) $16,000 S $105,000 560 $418,000 Net sales Cost of goods sold Gross profit from sales 4,00 31,00 -320.00 215,00 -8.000-64.000 Gross profit margin ratio Gross profit/ Sales) x 100 Operating expenses ?9.000 . 31.000 -22.00? -261,000 106.000 rofit (loss) Quick Study 5-2

Module Two: Merchandising for a Profit Operating Income (Gross Sales and...

Module Two: Merchandising for a Profit Operating Income (Gross Sales and Net Sales) 1. Return Percentages: Customer returns and allowances for Department #620 came to $5,500. Gross sales in the department were $100,000. What percentage of merchandise sold was returned? Customer returns and allowances $5,500 Gross sales $100,000 Return Percentage 2. Net Sales $: If gross sales...
What does service based business sell? How do we calculate its gross profit?

What does service based business sell? How do we calculate its gross profit?
Give two real-life examples of actual companies for a service business, two examples of a merchandising...

Give two real-life examples of actual companies for a service business, two examples of a merchandising business, and two examples of a manufacturing business. Of the companies you mention, which one would you prefer to be the CEO of? How would you manage that choice differently based on what type of business it is? For example, how would you lead a service business versus a manufacturing business? How would your concerns be different and how would they be the same？

ABC Inc is a merchandising business that sells clothing to adults 1) ABC borrowed $90,000 from...

ABC Inc is a merchandising business that sells clothing to adults 1) ABC borrowed $90,000 from the bank to start the business 2) Purchased $50,000 inventory for cash. 3) Inventory costing $26,000 was sold for $50,000 cash 4) Paid $8,000 cash for operating expenses What is revenue, expenses, gross profit and net profit for ABC based on information above.
What is the difference between a service business and a merchandising business? As you answer the...

What is the difference between a service business and a merchandising business? As you answer the question, you may want to look at the difference in accounts used as well as the differences between product costs and selling and administrative costs.
Kleiner Merchandising Company Accumulated depreciation $ Beginning inventory Ending Inventory Expenses Net Purchases Net Sales 700...

Kleiner Merchandising Company Accumulated depreciation $ Beginning inventory Ending Inventory Expenses Net Purchases Net Sales 700 8,500 4,500 1.800 9,500 16,500 Krug Service Company Expenses $ 8,100 Revenues 21,000 Cash 600 Prepaid rent Accounts payable 200 Equipment 1,900 640 Required: a. Compute gross profit, the goods available for sale, and the cost of goods sold for the merchandiser Hint Not all information may be necessary b. Use the above information from a service company and from a merchandiser to compute...

Kleiner Merchandising Company Accumulated depreciation $ Beginning inventory Ending Inventory Expenses Net Purchases Net Sales 700...

Kleiner Merchandising Company Accumulated depreciation $ Beginning inventory Ending Inventory Expenses Net Purchases Net Sales 700 8,500 4,500 1,800 9,500 16,500 $ 8. 100 21,000 Krug Service Company Expenses Revenues Cash Prepaid rent Accounts payable Equipment 600 640 200 1.900 Required: a. Compute gross profit, the goods available for sale, and the cost of goods sold for the merchandiser. Hint Not all information may be necessary b. Use the above information from a service company and from a merchandiser to...