Merchandising Business Accounting is a type of business where particular companies or entities purchase inventory from other companies and resell it to get some profit. Stores that you see in every cities fall under this category. You can categorize them as distributor, agents or resellers, depending on their company or inventory size. This Accounting for Merchandising Business spreadsheet is a tool to help you record and summarize your trading/retail transactions in Microsoft Excel.
Cost of Goods Sold (CoGS) is a key term that differentiates this type business with other models. You won’t meet with this term in Service companies. You will get this term in Manufacturing companies, but it doesn’t come from purchasing from other companies. It comes from the combination of raw material cost and factory overhead. Then, you put profit on top of this cost to cover all of your expenses.
Merchandising Income Statement
In general, companies who bought it from manufacturing companies and in bulk quantity get the best price where they can put proper margin to sell to other companies. Many companies fall to this category, because it is easy to buy and sell things. They don’t have to think about developing their own products. They just think about how to distribute and sell them as many as possible to get maximum profit.
Accounting Cycle of a Merchandising Business
Accounting Cycle for Merchandising Business
This Accounting for Merchandising Business spreadsheet is one of the tool you can use to summarize your trading and retail businesses.
There are main parts in the spreadsheet where you will work frequently to record your transaction.
Accounting for Merchandising Business – Chart of Accounts Setup
This is an initial page where you can put your company identity and chart of accounts that you can use in your company frequently. Chart of Accounts codes can be used as main references in all worksheets inside this spreadsheet. Different type of business could have different Chart of Accounts codes format.
There are general journal and special journals where you can log your financial transactions. Special journals consist of cash, sales and purchase journals. You might find different journal classification in some accounting software but you don’t have to worry about it. It is just a method to log the transaction to into journals. Sometimes you will find merchandising companies have more than three special journals, for example, separating cash journals into cash-in and cash-out journals. Also, there are companies that only write all of their transaction in one general journal only.
In this Accounting for Merchandising Business spreadsheet, you can classify and write all of your transaction as follows :
- General Journal : All non cash transaction that are not parts of Sales and Purchasing transaction
- Cash Journal : All cash transaction including sales and purchasing transaction
- Sales Journal : All sales transaction excluding cash transaction
- Purchase Journal : All purchase transaction excluding cash transaction
There are four main financial report you can generate from journals. It is as easy as selecting respective chart of account codes in each report format worksheet. Then, you will get them printed in report worksheet with formal layout.
- Profit and Loss Report : To show your company profit and loss situation. You can see them in month visualization as you can see in screenshot below.
- Balance Sheet : To show your company financial health condition. You can monitor them in month display as well and analyze whether your assets tend to increase or decrease over months.
- Cash Flow Report : This one to show you your company cash flow situation. This is the easiest parameter to see since you can see them physically.
- Equity Report : To show your investors or yourself status of your investment