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29 November, 01:28

Which of the following is a difference between the financial statements of a merchandising company and a service company?

A : A merchandising firm uses a multiple step income statement while a service firm uses a single step income statement.

B : A merchandising firm has an expense titled Cost of Goods Sold, while a service firm does not.

C : A service firm has an asset titled Supplies, but a merchandising firm does not.

D : A merchandising firm has an asset titled Cost of Goods Sold, but a service firm does not

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Answers (1)
  1. 29 November, 03:57
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    The correct option is (B)

    Explanation:

    Cost of goods sold the cost attributed to goods produced by the organization. Cost of goods sold is incurred by organizations that manufactures a tangible product. Service firms do not incur any cost on goods sold as they do not need any raw material to manufacture goods.

    Cost of goods sold is an expense and not an asset as it is a cost incurred to manufacture assets for the organization.

    Therefore, correct option is (B)
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