Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Merchandising Company vs. Manufacturing Company

Financial Accounting

5. Inventory

Merchandising Company vs. Manufacturing Company

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Multiple Choice

A key difference between a master budget prepared for a merchandiser versus a manufacturer is:

A merchandiser prepares a direct materials budget, while a manufacturer does not.

A merchandiser includes a purchases budget instead of a production budget.

A manufacturer does not prepare a cash budget, but a merchandiser does.

A merchandiser includes a raw materials inventory budget, while a manufacturer does not.

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Verified step by step guidance

Understand the concept of a master budget: A master budget is a comprehensive financial planning document that includes various individual budgets, such as sales, production, and cash budgets, to provide a complete overview of an organization's financial activities.

Identify the key difference between a merchandiser and a manufacturer: A merchandiser purchases finished goods for resale, while a manufacturer produces goods using raw materials and labor.

Recognize the specific budgets involved: A merchandiser typically prepares a purchases budget to plan for the acquisition of inventory, whereas a manufacturer prepares a production budget to plan for the production of goods.

Note that a manufacturer also prepares a direct materials budget to account for the raw materials needed for production, while a merchandiser does not need this budget since it does not produce goods.

Understand that both merchandisers and manufacturers prepare cash budgets to manage cash inflows and outflows, but the structure and components of their budgets differ based on their operational needs.