What items appear on the merchandising company statements that don’t appear on the service company statements?
Why is there a difference?
The items that appear on merchandising company statements but not on service company statements include inventory, cost of goods sold (COGS), and gross profit.
Inventory refers to the products that a merchandising company sells. It is considered an asset and appears on the balance sheet. Service companies do not have inventory since they do not sell tangible products.
Cost of goods sold (COGS) represents the direct costs incurred to produce or purchase the products that the merchandising company sells. It includes the cost of materials, labor, and other expenses directly associated with the production or purchase of goods. COGS is subtracted from the revenue in order to calculate the gross profit. Service companies do not have COGS since they do not sell physical products.
Gross profit is the difference between net sales and COGS. It represents the revenue remaining after accounting for the direct costs associated with the production or purchase of goods. This helps measure the profitability of a company's core operations. Service companies do not have gross profit since they do not have COGS.
The difference between the items on merchandising company statements and service company statements is due to the nature of their respective businesses. Merchandising companies deal with buying and selling physical products, while service companies provide intangible services. As a result, their financial statements reflect the different operations and expenses involved in their business models.