REPORTING AND ANALYZING MERCHANDISING OPERATIONS

MERCHANDISING BUSINESS:

Hypermarket/Wholesale– Carrefour, Giant, Tesco
Bicycle Shop: Buy from wholesaler & sell bicycle to customers
Bookshop: Buy books from publisher & sell books to customers

     

Service vs. Merchandising

• Service business  

1. Provide services to customer
2. Sells skill, knowledge, time & etc. 

• Merchandising business

1. Buys & sells products 
2. Wholesaler & Retailer 
3. NOT INVOLVED IN MANUFACTURING

Merchandiser

Merchandising companies are different from service organizations because they sell inventory. Merchandising companies can sell inventory in the wholesale market or to consumers in the retail market.

Special meaning of ‘sales’ and ‘purchases’.

1. Both ‘sales’ and ‘purchases’ have a special meaning in accounting.
2. Purchases means the purchase of those goods which the business buys with the sole intention of selling.
3. Sales means the sale of those goods in which the business normally deals and which were bought with the prime intention of resale.

Purchase invoices

1. Purchase invoices are sent to the buyers of any goods that have been bought on credit.
2. Any sales invoice issued by a business is a purchase invoice when received by the buying business.
3. The buyer enters the purchase invoice into a purchase day book before recording the details using double entry bookkeeping.

Purchase day book

Posting credit purchases

From the purchases day book:

1. The credit purchases are posted individually to the credit of each supplier’s account in the purchases ledger.
2. The total of the credit purchases is posted to the debit of the purchases account in the general ledger.

Inventory

Normally, goods and services are sold above cost price, the difference being profit. As 

you know, when goods and services are sold for less than their cost, the difference is a loss.

>An increase in inventory can be due to one of two causes:

1. The purchase of additional goods.
2. The return in to the business of goods previously sold.

To distinguish the two aspects of the increase of inventory, two accounts are opened:

1. A purchases account, in which purchases of goods are entered.
2. A return inwards account, in which goods being returned into the business are entered.

>A decrease in inventory can be due to one of two causes:

1. The sale of goods.
2. Goods previously bought by the business now being returned to the supplier.

To distinguish the two aspects of the decrease of inventory, two accounts are opened:

1.  sales account, in which sales of goods are entered.
2. A return outwards account, in which goods being returned out to a supplier are entered.