5

Accounting for Merchandise Operations

Learning Goals

Distinguish the activities and financial statements of a

service business from those of a merchandise business.

Describe and illustrate the financial statements of a mer-

chandising business.

Describe the accounting for the sale of merchandise.

Describe the accounting for the purchase of merchandise.

Describe the accounting for transportation costs and

sales taxes.

Illustrate the dual nature of merchandising transactions.

Describe the accounting for merchandise shrinkage.

Describe and illustrate the effects of inventory misstate-

ments on the financial statements.

Describe and illustrate the use of gross profit and operat-

ing income in analyzing a company’s operations.

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