Question: 1. What is the distinction between service and merchandising companies? What is the distinction between merchandising and manufacturing companies? What is the distinction between retail and wholesale merchandising companies?
2. What is the main distinction between perpetual and periodic inventory systems? Which type of system provides better internal control over inventory? Explain why.
3. Why is a physical count of inventory necessary in a periodic inventory system? Why is it still necessary in a perpetual system?
4. Describe how transportation costs to obtain inventory (freight-in) are accounted for by a merchandising company using a perpetual inventory system. Explain the reasoning behind this accounting treatment.
5. What is the distinction between purchase returns and allowances and purchase discounts?