Question

Which of the following is a difference between the financial statements of a merchandising company and a service company?

Answer 1

Answer:

The correct option is (B)

Explanation:

Cost of goods sold the cost attributed to goods produced by the organization.  Cost of goods sold is incurred by organizations that manufactures a tangible product. Service firms do not incur any cost on goods sold as they do not need any raw material to manufacture goods.

Cost of goods sold is an expense and not an asset as it is a cost incurred to manufacture assets for the organization.

Therefore, correct option is (B)