Lesson 1: From Service to Corporation: Introduction to Merchandising Accounting
Duration of Days: 3
Lesson Objective
Students will analyze the structural differences between service businesses and merchandising corporations. Students will explain how inventory, Cost of Goods Sold (COGS), and corporate ownership impact the accounting process and financial statements.
• What makes a merchandising business different from a service business?
• Why does inventory change everything in accounting?
• What is Cost of Goods Sold, and how is it calculated?
• How does corporate ownership differ from sole proprietorship ownership?
• How do merchandising transactions affect the accounting equation?
• Merchandising business
• Inventory
• Cost of Goods Sold (COGS)
• Gross profit
• Sales revenue
• Purchases
• Perpetual inventory system
• Corporation
• Common stock
• Retained earnings
B. Accounting Principles: Identify and describe GAAP principles and explain their impact on recording and financial reporting.
C. Accounting Process: Complete steps of the accounting cycle and analyze financial statement impact.
Analyze and describe how business transactions impact the accounting equation.
Students strengthen mathematical reasoning and analytical comparison skills by evaluating structural differences in business models and financial statement impact.
Description:
Students compare a service business income statement with a merchandising corporation income statement. Through guided analysis, students identify the introduction of inventory and Cost of Goods Sold and calculate gross profit
Purpose:
This lesson marks the transition from service accounting to corporate merchandising accounting. Students expand their understanding of revenue and expense relationships by examining how inventory and cost flow affect profitability and financial reporting.
DOK 1: Define merchandising terminology.
DOK 2: Classify merchandising transactions.
DOK 3: Analyze how inventory impacts profitability and financial position.
Students examine real companies (retailers, online stores, wholesalers) and identify how inventory drives revenue and profit. Discussion connects merchandising accounting to companies students recognize and consumer behavior they experience daily
• Sales revenue equals profit.
• Inventory is just another expense.
• Side-by-side financial statement comparison chart
• Visual diagram of merchandising transaction flow
• Small group classification practice
• Excel demonstration calculating gross profit
• Scaffolded notes and guided examples
• Spanish vocabulary support for ELL students
• Guided Notes
• Gross profit calculation worksheet
• Transaction classification practice
• Exit ticket explaining the difference between service revenue and merchandising gross profit
• Short written comparison of service vs merchandising businesses
• Century 21, Accounting, General Journal, 11th edition (Merchandising chapters – service vs merchandising comparison)
• Online working papers (MindTap)
• Microsoft Excel software (for gross profit demonstration)
• Sample Service Business Income Statement
• Sample Merchandising Corporation Income Statement
• Side-by-side comparison graphic organizer
• Transaction classification practice sheet
• Guided Notes handout
• Do Now prompt: “Is revenue the same as profit?”
• Exit Ticket
• Projector / Smartboard for financial statement walkthrough