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Preparing an Income Statement

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Merchandising Business Income Statement
Preparing an Income Statement

Merchandising Income Statement

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.

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