Income Statement Format Merchandising

Similar to the reasons for changing the balance sheet there are three major reasons for.

Income statement format merchandising. Merchandising companies prepare financial statements at the end of a period that include the income statement balance sheet statement of cash flows and statement of retained earnings. The presentation format for many of these statements is left up to the business. The two formats for the income statement of a merchandising company are single step income statement and multi step income statement. Merchandising companies hold and account for product inventory which makes their income statements inherently more complicated.

Later on in the course we will discuss another format for the income statement called the contribution margin income statement. Income statement format merchandising manufacturing and service company in practice for financial accounting we ever knew cost of goods sold for merchandising company or cost of products sold for manufacturing company that are shown in income statement but we rare saw cost of service for service company in income statement. Merchandising companies hold and account for product inventory which makes their income statements inherently more complicated. Net sales sales revenue sales discounts sales returns and allowances.

Gross profit is the amount from sales that is left over after your product is paid for. To summarize the important relationships in the income statement of a merchandising firm in equation form. This is called the traditional format income statement. For this article only one format will be introduced the classified multiple step format.

In merchandising company income statement there is no detailed cost of goods sold statement is prepared while in manufacturing company income statement detailed cost of goods sold statement is. Total operating expenses selling expenses administrative expenses. Our needs however have surpassed this simple format. Much of the inventory calculation is manifested through the line.

Previously we used a two column income statement like the one below. Gross margin net sales cost of goods sold. This statement breaks out costs into product and period costs. Much of the inventory calculation is manifested through the line item cost of goods sold which is an expense account describing the cost of purchasing inventory and delivering it to customers.