In addition to sales and general and administrative expenses, an arts and crafts merchandising business income statement includes a cost of goods sold. As a merchandiser, you'll be buying your arts and crafts products from other companies so you won't have any raw material or labor costs.
Here's an explanation of the different components:
- Beginning Inventory - merchandise you have in your arts and crafts retail shop at the beginning of the month available for sale.
- Purchases - merchandise you buy during the current month. Beginning inventory plus purchases are your goods available for sale to customers.
- Ending Inventory - merchandise you have in your arts and crafts retail shop at the end of the month that has not yet been purchased by your customers.
- Goods available for sale minus ending inventory equals your cost of goods sold
Merchandising businesses also include as cost of goods sold any freight-in or storage costs you can directly tie to merchandising the product. Let's say you have to rent a storage unit for your overflow inventory. That also goes into your merchandising cost of goods sold. As a general rule all other expenses - even those of your sales staff - go in general and administrative expenses.