Is inventory the same as merchandise inventory?
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Merchandise inventory is finished goods acquired for sale by retail or wholesale traders. Finished goods possessed for sale by manufactures are usually called finished goods inventory. Show
Since accounting is the same for merchandise inventory and finished goods inventory, the merchandise inventory here is referred to both. Some goods are purchased in finished condition, ready to sell. For example:- Retail cloth firms normally purchase pant cloths, shirt cloths, ready-made shirts, pants, and blouse etc. which are always ready for sale. Related: Accounting Process Another example, retail firms’ hardware stores purchases hammers, nails, wrenches, and bolts etc. for ready sale. Other goods are purchased that require some minor finishing or assembling to make them ready for sale. For examples:- Bicycles are purchased in un-assembled condition. To make them ready for sale they need to be assembled. Since such finishing activities are minor goods these are included in merchandise inventory. But manufacturing companies purchase raw materials that they must convert into finished products. For example:- Furniture manufacturers purchase wood, plastic, glue, nails and other required raw materials and convert them into finished products like a table, chairs, shelves, desks, etc. and these are finished goods inventory. To be included in merchandise inventory finished goods must be ready for sale. Thus, the same assets represented by one firm as merchandise inventory may be considered differently by another firm. Suppose, for example:- The Dakar Furniture House has desks and file cabinets in its warehouse ready for sale and these are considered as merchandise inventory. The Modern Plumbing Supply Company buys some of these desks and file cabinets for its office use; these assets are considered as its office equipment. Any goods, whether it is the iron one or sheet steel or toy trains, if it is finished goods and ready for sale, it is the merchandise inventory of the firm that owns it. Definition: Merchandise inventory is goods that a company purchases and plans to resell to customers at a higher price. Typically, retailers and wholesalers are the only businesses with merchandise inventory. Manufacturers produce inventory, but they don’t purchase it and resell it. Thus, a manufacturer’s inventory isn’t considered merchandise inventory. Retailers, wholesalers, and distributors buy goods from manufacturers and
actively market or merchandise the goods to customers. The distinction between a retailer’s customer and a manufacturer’s customer is that a retail customer is the end user of the product. Retailers record their inventory on the balance sheet as a current asset and usually listed below cash and accounts receivable. Here’s an example of the typical merchandiser’s operating cycle and the journal entries required. When a retailer purchases inventory from a manufacturer, it is recorded as an asset by debiting the inventory account and crediting cash or accounts payable. Notice that inventory is not expensed until it is actually sold. Here is the entry to record a bulk
inventory purchase by a retailer early in the year. Later, when the retailer sells $100 of that merchandise inventory to a customer for $500, the cash account is debited and the revenues account is credited for the same about. The inventory account is credited for the amount the retailer paid for the inventory and the cost of goods sold account is debited for the same account. Basically, all merchandise is capitalized when it is purchased and recorded on the balance sheet as a current asset. When it’s later sold to a customer, the inventory is transferred from the asset account to an expense account. You can think of the merchandise inventory account as a holding account for inventory that is waiting to be sold.
merchandise | inventory | As nouns the difference between merchandise and inventoryis that merchandise is (uncountable) commodities offered for sale while inventory is (operations) the stock of an item on hand at a particular location or business. As verbs the difference between merchandise and inventoryis that merchandise is (archaic) to engage in trade; to carry on commerce while inventory is (operations) to take stock of the resources or items on hand; to produce an inventory.
Is merchandise inventory a inventory?Merchandise inventory refers to the value of goods in stock, whether it's finished goods or raw materials that are ready to sell, that are intended to be resold to customers. Think of it as a holding account for inventory that is expected to be sold soon.
What are the two types of merchandise inventory?The two systems for maintaining merchandise inventory are periodic and perpetual. There are also two University-approved methods for determining the monetary value of merchandise inventory: First In, First Out (FIFO) - Required for periodic inventories, can also be used for perpetual.
What are the 4 types of inventory?While there are many types of inventory, the four major ones are raw materials and components, work in progress, finished goods and maintenance, repair and operating supplies.
What is an example of merchandise inventory?Furniture manufacturers purchase wood, plastic, glue, nails and other required raw materials and convert them into finished products like a table, chairs, shelves, desks, etc. and these are finished goods inventory. To be included in merchandise inventory finished goods must be ready for sale.
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