Question

Cost of goods sold would NOT appear on the income statement of which of the following...

Cost of goods sold would NOT appear on the income statement of which of the following types of businesses?

a.

Merchandising Company
b.

Manufacturing Company
c.

All of the listed would have a cost of goods sold account
d.

Service Company
Business   Accounting   
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Answer #1

d. Service company

1.SERVICE COMPANIES DO NOT SELL A PRODUCT, HENCE THE INCOME STATEMENT WILL NOT CONTAIN COST OF GOODS SOLD,THEY CONSIDER OPERATING EXPENSES AS A PART OF THEIR COST OF SERVICE.

2. THE INCOME STATEMENT CONTAINS OPERATING EXPENSES AND INCOME AND THE DIFFERENCE BETWEEN INCOME AND OPERATING EXPENSES IS THE OPERATING INCOME.

3.EXAMPLE OF SERVICE COMPANIES INCLUDE , ACCOUNTING FIRMS,LAW OFFICES, REAL ESTATE APPRAISERS,BUSINESS CONSULTANTS ETC.

4.MERCHANDISING COMPANIES SELL PRODUCTS BUT DO NOT MAKE THEM. THEREFORE , THESE COMPANIES WILL HAVE COST OF GOODS SOLD.

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