What items appear on the merchandising company statements that don’t appear on the service company statements?

Why is there a difference?

pls help not sure of what to answer

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On merchandising company statements, there are several items that appear but don't usually appear on service company statements. These items include:

1. Cost of Goods Sold (COGS): This represents the direct costs associated with producing or purchasing the goods sold by the company. It includes the cost of materials, labor, and overhead directly related to the production or acquisition of goods.

2. Inventory: Merchandising companies maintain inventory for resale purposes. This includes the goods they have purchased but not yet sold. Inventory is a crucial item on merchandising company statements as it impacts the calculation of COGS and the valuation of assets.

3. Gross Profit: This is the difference between net sales revenue and COGS. It represents the profit generated from the sale of goods before deducting operating expenses.

The reason these items don't appear on service company statements is that service companies do not sell physical products like merchandising companies. Instead, they provide intangible services, such as consulting, healthcare, or legal services. Therefore, service companies do not have inventory or incur direct costs associated with producing goods. They typically have operating expenses that are associated with providing services, such as salaries, rent, and utilities.

The difference in items between merchandising and service company statements is due to the nature of their respective business operations.

On the merchandising company statements, there are several items that do not appear on the service company statements. These items include:

1. Cost of goods sold (COGS): This represents the direct costs associated with the production of goods. Service companies do not have COGS because they do not sell tangible products.

2. Inventory: Merchandising companies hold inventory, which represents the unsold goods they have on hand at the end of an accounting period. Service companies do not hold inventory because they do not have physical products to sell.

3. Gross profit: It is calculated by subtracting the COGS from the total revenue. Since service companies do not have COGS, they do not calculate gross profit.

4. Gross margin: It is the ratio of gross profit to total revenue. Since service companies do not calculate gross profit, they also do not calculate gross margin.

5. Sales returns and allowances: This represents the amount of revenue that is returned or reduced due to customers returning products or receiving allowances. Service companies generally do not have physical products to return, so this item is not present on their statements.

The main reason for these differences between merchandising and service company statements is that merchandising companies are involved in the buying and selling of physical products, while service companies provide intangible services. As a result, their accounting and financial reporting requirements differ based on the nature of their operations.