NATURE OF MERCHAN

DISING BUSINESS
What is a Merchandising Business?

A firm that engages buying and selling

finished goods such as grocery
items,ready-to-wear clothing, and
other similar items ready for use or for
consumption.
MERCHANDISING
BUSINESS
 MERCHANDISING BUSINESS

Characteristics:
1.Buying and Selling
2. Holds Inventory of Physical Goods
3.Adds Mark up or Profit to the Cost of Goods
4.Operating Cycles involves Three transactions
5. Accounting procedures are same to service and
manufacturing concern.
1.Buying and
Selling
B ACQUIRE
U MERCHANDISE
Y AT A CERTAIN
PRICE

SELL IT AT A S
PRICE HIGHER E
THAN THE L
L
ORIGINAL
PRICE FOR
PROFIT
1. Buying and
Selling A person or company who sells in
W bulk to various outlets or retailers
H
O
for onward sale, either directly or
L through a middleman. Wholesalers
E are able to sell their products for a
S
A
lower price as they are selling in
L bulk, which reduces the handling
E time and costs involved.
R
A person or a company who sells
R
products directly to their E
customers for a profit. The T
products they sell will be at a A
I
higher price than they would be L
from a wholesaler,due to mark E
ups R
2. Holds Inventory of physical
goods

A merchandising business necessarily holds inventory

of physical goods for sale. Inventory simply refers to
the goods that a merchandising business has
purchased and primarily intended for resale,
normally in their original form and without any
further processing.
3. Adds Markup or
Profit to the Cost of
Goods

Cost of Goods + Markup

Added into the total
cost of a good in
order to cover the
costs of doing
business and earn
profit.
3. Adds Markup or
Profit to the Cost of
Goods
Ex.

COST= P950.00
MARKUP= 20% of Cost
SELLING PRICE = ?

COG = P950.00
MU= P190.00
 4. Operating Cycle involves Three
transactions

THE OPERATING
CYCLE
- series of transactions
through which a
business generates its
revenue and its cash
receipts from
customers.
5. Accounting Procedures are same
to Service and Manufacturing
Concern
Accounting Procedures
- the procedures in accounting for the
financing and investing activities as well as
marketing and administrative cost applied
to a merchandising concerns are same as
those applied to service and manufacturing
concerns.
 BUSINESS
DOCUMENTS
Business Documents

• Purchase order
• Charge sales invoice
• Cash sales invoice
• Official receipt
• Debit Memorandum(Debit
Memo)
• Credit Memorandum(Credit
Memo)
Comparison of Inc
ome Statements
 Service Merchandising
Income Statement Income Statement

Revenues from Services Net Sales

minus
minus Cost of Sales
equals
Expenses Gross Profit
add or minus
equals Income or expenses
equals
Profit Profit
 Bervs Lam Traders
Income Statement
For the Year Ended Dec. 31,2020

Net Sales P3,494,050

Cost of Sales (2,381,000)
Gross Profit P1,113,050
Operating expenses ( 870,291)
Operating Profit P 242,759
Finance Costs 50,700
Profit P 293,459
QUIZ

1-3 Give at least 3 Characteristics of

Merchandising
4-5 Two types of Merchandising business
6-10(5pts.) Distinguish the income
statement of a service entity from that of a
merchandising entity