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Business LibreTexts

5.11: Discussion Questions

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    1. How does the income statement prepared for a company that sells goods differ from that prepared for a service business?
    2. How is gross profit calculated? What relationships do the gross profit and gross profit percentage calculations express? Explain, using an example.
    3. What are some common types of transactions that are recorded in the merchandise Inventory account?
    4. Contrast and explain the sales and collection cycle and the purchase and payment cycle.
    5. What contra accounts are used in conjunction with sales? What are their functions?
    6. (Appendix) Compare the perpetual and periodic inventory systems. What are some advantages of each?
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