Multiple Choice
For which of the following businesses would a job costing system be most appropriate?
21
views
4. Merchandising Operations
Service Company vs. Merchandising Company
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which account does a merchandising company use that a service company does not use?
A
Service Revenue
B
Accounts Receivable
C
Inventory
D
Prepaid Expenses
Verified step by step guidance1
Understand the difference between a merchandising company and a service company. A merchandising company sells physical goods, while a service company provides intangible services.
Identify the accounts typically used by a merchandising company. These include accounts related to the purchase, storage, and sale of inventory, such as 'Inventory' and 'Cost of Goods Sold (COGS)'.
Recognize that a service company does not deal with physical goods, so it does not use accounts like 'Inventory'. Instead, it focuses on accounts related to service revenue and expenses.
Compare the options provided in the question: 'Service Revenue', 'Accounts Receivable', 'Inventory', and 'Prepaid Expenses'. Note that 'Inventory' is specific to merchandising companies because it tracks the value of goods available for sale.
Conclude that the correct answer is 'Inventory', as it is the account used by a merchandising company but not by a service company.
Related Videos
Related Practice
Service Company vs. Merchandising Company practice set
Problem sets built by lead tutorsExpert video explanations