Acct505 Week1 Discussion Summary Essay

698 Words Jul 15th, 2013 3 Pages
Jonathan Gruenebaum Acct-505 Week 1 Summary
Threaded Discussion #1

1. The Difference in Income Statements of a Service Company Vs. a Merchandising Company

In a modern economy, sales revenue is the fuel that drives services, innovation and competition -- whether the income stems from a service company or a merchandising business. If you study an organization's income statement, you see things like revenues, cost of goods sold and administrative expenses -- all of which lead to net income or loss at the end of the reporting period.
Income Statement
When much of the economy struggles, you can look at corporation's income statement to figure out whether it's bowing to the overall negative environment or whether top leadership can
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A department store, for example, fits the description of a merchandising business. In the company's income statement, you see things like sales revenue, product rebates, cost of goods sold, storage, shipping and hazardous material insurance -- in sum, any cost relating to the conveyance, maintenance and handling of merchandise.
Summary
An income statement -- whether it be for a merchandising business or a service company -- helps regulators and investors understand what goes on behind closed corporate doors. Report readers pay attention to profitability data, but they also heed whether senior executives lived up to their creed of financial transparency and regulatory compliance during the period under review. Accounting rules generally require that a business post expense and revenue information while revealing relevant facts about how it makes money, products it relies on to sustain itself competitively and top customers that generate the bulk of corporate revenue.

2. Cost Classifications
Prime costs are the sum of all direct costs such as direct materials, direct labor and any other direct costs.
Conversion costs are all costs incurred to convert the raw materials to finished products and they equal the sum of direct labor, other direct costs (other than materials) and manufacturing overheads.
Differential cost is the difference between the cost of two alternative decisions, or of a change in output levels. The concept is used

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