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4 October, 23:45

Which of the following represents the components of the income statement for a merchandising business?

Sales Revenue - Cost of Goods Sold = gross profit

Service Revenue - Operating Expenses = gross profit

Sales Revenue - Cost of Goods Manufactured = gross profit

Service Revenue - Cost of Goods Purchased = gross profit

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  1. 5 October, 01:03
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    Sales Revenue - Cost of Goods Sold = gross profit

    Explanation:

    A merchandising business is one that is involved in selling goods to customers. The firm may purchase or produce the goods it sells. Merchandising firms report an expense named the cost of goods sold COGS. This cost represents the total cost of all goods sold to customers during a period.

    Costs of goods sold include the direct cost associated with the merchandise. Calculation of COGS is by adding net purchases to the opening stock then subtracting ending stock. The cost of goods sold is used in calculating gross profit. Service firms do not report this cost as they do not sell goods.
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