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Accounting

A firm which buying and reselling products is calls merchandise. This is also a way for the merchandising business to earn their profit. Merchandising businesses are different from service businesses. Merchandising businesses have goods on hand and resell to customers, it is called inventory (Wise, Anderson, Caldwell 1998:180).However, inventories are recorded day to day under periodic or perpetual methods. Further, very businesses transactions involved the Goods and Service Tax. This essay is set out to explore the operation of merchandising business, the two methods which use to record inventory transactions and the application of Goods and Service Tax.
In most merchandising businesses stock on hand, which is also called inventory, stock in trade or simply stock, is a very important asset. Thus, it is necessary to keep the inventory safe from damage, deterioration and theft. This requires the building of storage areas and the employment of personnel expert in handling inventories (Clift, Roberts 1990:286). Moreover, a retailer must keep substantial stocks because customers, after selecting specific items from a range of alternatives, want the goods immediately, not next week after they have been ordered from the manufacturer. Therefore, an accurate record of inventory is important to ensure that there is enough stock for sell. Many small retail businesses find that the computerized inventory record system is useful. Managers of small businesses can control their inventories and manage day-to-day operations without detailed inventory records by simply looking at their shelves (Kimmel, Carlon, Loftus, Mladenovic 2003:172). In addition, an accurate record is useful to detect possible accounting errors and fraud. Managers can easy find out the mistakes and differences by checking the inventory record and the physical stock. It is also important that Cost of goods sold must be updated in order to calculate gross profit. Gross profi