Merchandising: Operation of Merchandise
This free online accounting training tutorial will help you to understand:
- Meaning & Definition of Merchandising
- Meaning & Definition of Merchandising Company
- Meaning of Merchandise Operation
- Types of Merchandising Companies
Merchandising is selling products to consumers. Merchandising is a popular marketing term which also means selling product and services of a company by others. In merchandise retail stores there are wide variety of products are displayed for consumer to be sold. Merchandising companies are those companies who focus on the buying and selling of merchandise rather than focusing on the performing service. Merchandising companies mainly deal with the retailer and wholesaler. A retailer means the consumer who directly hat purchase and sell from the merchandise company. Merchandising companies that sell to retailers are known as wholesalers. The sale of merchandise is the primary source of revenues for merchandising companies is which referred as sales revenue or sales.
A merchandising company basically experience two particular types of Expenses: Cost of goods sold and operating expenses.
Cost of goods sold: This expense goods is directly correlated to the revenue earned acknowledged from the sale of Goods. Cost of goods sold is the total cost of merchandise sold during the accounting period. If the sales revenue is reported then the cost of goods sold is reported on the income statement. At the end of an accounting period, total cost of goods available for sale must be allocated between remaining inventories for reporting in the balance sheet as an asset and inventory sold during the accounting period for reporting in the income statement as an expense.
Operating Cycles: Some of the merchandising companies have more operating cycle because they purchase inventory then sell it to their clients and again purchase inventory with the earning money. And some merchandising companies produce the merchandise and sell their merchandise to the clients. Generally operating cycle of any company is about 1 year. But the operating cycle of a merchandising company usually is longer than any service company. Basically there are two reasons for the extended operating cycle of any merchandise company, the purchase process of merchandise inventory and its eventual sale. Merchandise inventory is reported as a current asset on the balance sheet of Merchandise Company.