Summary

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Chapter 5: Summary
Topic Covered
Chapter 5 presents the issue of merchandising, which is one of the three types of businesses. Merchandising basically, is a type of business in which goods are purchased by merchandising firms, which then sell these goods to customers. The money received from selling products is recorded, and the cost of acquiring the products subtracted to attain the gross profit, in a merchandising business. All expenses incurred during the business operation are then deducted from the total gain to obtain the net profit. Purchases made after the sale of merchandise and recorded as inventory. Other records include returns for returned purchases and sales of merchandise. In a merchandise business, discounts are offered to customers to encourage to pay earlier. Shipping of merchandise requires either the buyer or the seller to pay for the shipment expenses depending on the destinations and the agreement between the two parties. A seller in a merchandising business must record two adjusting entries for allowances and expected returns.
Importance of the Topic Covered
Merchandising enterprises are run by different people and involve managers, investors, creditors, and customers among other parties. It is crucial for all these groups of people to have an informed knowledge about some of the aspects of the business. Being aware of the company and how it works is also very important. For instance, knowing that one can return merchandise if it does not work and get refunded accordingly could be quite helpful for customers.

A new business person looking to venture into merchandising must know how to create inventories, how to determine net profits and sales, to properly run a merchandising business.

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