🔑Merchandising businesses include merchandise inventory and estimated returns inventory on their balance sheet as current assets.
🔑The income statement for merchandising businesses is a multiple-step statement that provides more information on profits from the sale of merchandise versus operating expenses.
🔑Calculating gross profit involves subtracting the cost of merchandise sold from revenues derived from the sale of goods.
🔑Operating income is obtained by reducing gross profit by operating expenses, representing the income earned from normal business operations.
🔑Net income is determined by adjusting operating income for other non-operating revenues or expenses that do not directly relate to day-to-day operations.