Chapter 6, Problem 1DQ

To determine

Distinguish between merchandising businesses from a service business.

Explanation of Solution

The following table shows the differences between a merchandising business and service business.

Details	Merchandising Company	Service Company
Meaning	A merchandising company generates income by selling goods to its customers.	A service company produces income by providing services to their customers.
Type of Revenues	Sales Revenue Example: Selling price of merchandise inventory.	Service Revenue Example: Fees received, Rents received, Interest income.
Type of 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)