The Merchandise Inventory account increases when a purchase is made, so we used the debit side of Merchandise Inventory account. The Cash account decreases when a purchase is made, so we used the credit side of Cash account.

Grocery store is a merchandising company.

The materiality concept states that a company must perform strictly proper accounting only for significant items.

Internal users can also need some detailed information which is not ready to use in basic and standardized financial statements. In these cases, managerial accounting procedures are applied to produce internal reports to help internal users in their decision making process.

Merchandise inventory account is 720.000 debited. Cash account is 720.000 credited. 

The dotted line should be percentage of sales basis

A manufacturing company produces goods and usually sells them to merchandising firms. Although the products they produce may differ, manufacturers normally have
three inventory accounts in their financial statements: raw materials, work in process, and finished goods. Raw Materials Inventory reports the cost of goods and materials on hand which will be used in production. Work in Process Inventory reports the cost of goods, materials and other components of manufacturing process used for the inventory which are still in production process, in other words unfinished at the time
financial statements are prepared. Finished Goods Inventory reports the cost of goods, materials and other components of manufacturing process used for the inventory produced and available for sale.The correct choice is E.

Receivables can be classified with respect to the nature of the transaction or with respect to their maturity structures.Trade receivables are account and notes receivables from sales transactions.Receivables are known as claims arising
from credit sales or loan transactions.

The correct answer is C. Merchandising company use sales revenue account. Service company use the service revenue account.

Raw Materials Inventory reports the cost of goods and materials on hand which will be used in production.

A retailer buys merchandise inventory either from a producer or a wholesaler and then sells those goods to consumers.

Dotted line should be like (B)

Based on their operations, companies are classified in three categories as “service companies”, “manufacturing companies”, and “merchandising companies”.

The cost of goods sold is based on the most recent purchases (new costs) –that is, the last units in are assumed to be the first units out of the warehouse (sold). This
method is forbidden for being misleading especially in hyperinflationary economies.

Having the ability to measure inventory in a timely and accurate manner is critical for having uninterrupted business operations since inventory is often one of the largest current assets on a company’s balance sheet. An error in ending merchandise inventory creates a whole string of errors in other related accounts. So, businesses have to perform a physical count of their merchandise inventory at the end of each accounting period to report their inventories with correct values. B is the right answer.

Showing that facts are misrepresented is irrelevant.