Merchandising company

Definition

A merchandising company is a business that purchases finished goods and resells them to customers. These companies make a profit by selling products at a higher price than their purchase cost.

5 Must Know Facts For Your Next Test

1. Merchandising companies typically have two main types of inventory accounts: merchandise inventory and cost of goods sold (COGS).
2. They generate revenue by selling physical products rather than services.
3. Merchandising companies prepare multi-step income statements that include gross profit calculations.
4. Purchases, freight-in costs, and returns are key transactions unique to merchandising companies.
5. The operating cycle of a merchandising company includes purchasing inventory, selling it, and collecting receivables.

Review Questions

Related terms

Inventory:

Goods or materials that a business holds for resale.

Cost of Goods Sold (COGS): The direct costs attributable to the production or purchase of the goods sold by a company.

Gross Profit:

The difference between sales revenue and the cost of goods sold before accounting for other expenses.