Question

Please answer the following questions:

"The steps in the operating cycle for a merchandising company are the same as the steps in the operating cycle for a service company." Do you agree or disagree?

What are the special journals that merchandising companies use? Explain how merchandising companies use these journals.

Answer 1

I will disagree

The steps in the operating cycle for a merchandising company are not same as the steps in the operating cycle for a service company."

Special Journals are designed to facilitate the process of journalizing and posting transactions. They are used for the most frequent transactions in a business. For example, in merchandising businesses, companies acquire merchandise from vendors, and then in turn sell the merchandise to individuals or other businesses. Sales and purchases are the most common transactions for the merchandising businesses. A business such as a retail store will record the following transactions many times a day for sales on account and cash sales.

Description	Debit	Credit
Accounts Receivable	XXX
Sales		XXX
Sales Tax Payable		XXX

Description	Debit	Credit
Cash	XXX
Sales		XXX
Sales Tax Payable		XXX Thanks