1. Chpt 10.1 Merchandising Business
Merchandising Business - ____________ ________________________________ Types: 1) ___________– buys goods from manufacturers and sells to retailers. 2) __________– buys goods from a wholesaler and sells them to the public (end consumer)

2. Merchandise Inventory
The goods that are purchased for resale are called merchandise inventory
Are these examples of merchandise inventory?
New and used cars at a car dealership
School busses at a school bus company
Cereal at a grocery store
Bobcat at a lumber company

3. Which Financial Statements Involve Inventory?
________________can be found on the:
_______________ can be found on the:
BALANCE SHEET (___________)
INCOME STATEMENT (_______________)

4. Inventory on the Balance Sheet Merchandise Inventory is a current asset ______________________________.
Chapter 10 – Accounting for a Merchandising Business | Accounting 1, 7th Edition

5. Inventory on the Income Statement
• Appears twice in an important formula
• The COST OF GOODS SOLD formula
Chapter 10 – Accounting for a Merchandising Business | Accounting 1, 7th Edition

6. How to find the Cost of Goods Sold when using the Periodic System:
________________________ + -
____________________
_________________________
_____________________

7. Cost of Goods Sold Formula
Chapter 10 – Accounting for a Merchandising Business | Accounting 1, 7th Edition

8. COGS on the Income Statement
From a count
From the ledger
From addition
From a count
From subtraction
• Calculating COGS this way requires a periodic count of inventory (The Periodic System)
• Purchases is a ledger account for the purchase of inventory
• Sales — Cost of Goods Sold = Gross Profit (Margin)
Chapter 10 – Accounting for a Merchandising Business | Accounting 1, 7th Edition

9. Types of Inventory Systems:
Periodic – used for Small Businesses
________________________of goods to determine:
The amount of inventory on hand
Cost of goods sold
Perpetual – used for Large Businesses
_________________________of:
Cost of goods sold to date

10. Disadvantages of Periodic
-need to take physical count of inventory __________________ _________________________________
-because the business owner doesn’t have timely, accurate information on inventory levels:
There can easily be an __________________(which may lose customers)
Items can be __________________(unnecessarily tying up cash)
***The former advantage to periodic was relative low cost, and ease of use, but technology have made perpetual affordable and practical for many businesses.