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Merchandising Company vs. Manufacturing Company definitions

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  • Merchandising Company
    Business that purchases finished products for resale, maintaining a single inventory account for all goods held for sale.
  • Manufacturing Company
    Business that produces goods from raw materials, maintaining separate inventory accounts for each production stage.
  • Inventory
    Asset account representing goods held for sale or use in production, appearing on the balance sheet.
  • Merchandise Inventory
    Single inventory account used by merchandisers to track all purchased goods intended for resale.
  • Raw Materials
    Initial inputs acquired for production, such as ingredients or components, before any processing occurs.
  • Work in Process
    Inventory account for goods currently being manufactured, including materials, labor, and overhead costs.
  • Finished Goods
    Completed products ready for sale to customers, held in a separate inventory account by manufacturers.
  • Perpetual Inventory System
    Method where inventory and related accounts are updated continuously with each purchase or sale transaction.
  • Accounts Payable
    Liability account representing amounts owed to suppliers for goods or services purchased on credit.
  • Cost of Goods Sold
    Expense on the income statement reflecting the cost of inventory sold during a period.
  • Balance Sheet
    Financial statement displaying a company's assets, liabilities, and equity at a specific point in time.
  • Income Statement
    Financial report summarizing revenues and expenses, including cost of goods sold, over a specific period.
  • Liabilities
    Obligations or debts owed by a company to external parties, such as suppliers or lenders.
  • Overhead
    Indirect production costs, such as utilities or supervision, included in the value of work in process inventory.