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)
The difference between the financial statements of a merchandising company and a service company is: B : A merchandising firm has an expense titled Cost of Goods Sold, while a service firm does not.
The major difference between merchandising company and a service company financial statement is cost of goods sold.
Reason being that a merchandizing company have an expense account which represent cost of goods sold as the company cost of goods sold incurred are recorded in the expense account.
While service company on the other hand does not have an expense account titled cost of goods sold reason being that service company does not produce goods.
Inconclusion a merchandising firm has an expense titled Cost of Goods Sold, while a service firm does not.
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