Chapter 5, Problem 1DQ

To determine

Differentiate a retail business from a service business.

Explanation of Solution

Retail Business and Service Business:

A retail business generates income by selling goods to its customers, whereas a service business produces income by providing services to their customers.

The following table shows the differences between retail businesses from a service business.

Details	Retail Business	Service Business
Revenues	Sales Revenue Example: Selling price of merchandise inventory.	Service Revenue Example: Fees received, Rents received, Interest income.
Expenses	Cost of goods sold and operating expenses Example: Rent, Office supplies, taxes, Utilities, Insurance.	Only operating expenses Example: Rent, Office supplies, taxes, Utilities, Insurance.

Table (1)