Explain the difference between a merchandising and a manufacturing balance sh...
Question:Explain the difference between a merchandising and a manufacturing balance sheet.The Balance SheetThe balance sheet indicates the position of an organization financially. It is one of the statements prepared in financial accounting. It helps decision-makers with the required information to determine whether a company has the ability to finance its debts. The balance sheet shows the assets and liabilities of a company.
Answer and Explanation:A Merchandising balance sheet is normally prepared by retailers and wholesale companies while manufacturing balance sheet is made by manufacturers of goods. The current assets part can be used to explain the differences that exist between the manufacturing and the merchandising balance sheet. On the division of the current assets of the balance sheet of a merchandising entity, there is only one type or category of inventory. On the other hand, the current asset part of a manufacturing balance sheet comprises of three categories of accounts of inventory, which are raw materials, finished goods, and work in progress.
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