Question

Place the operating cycle for a merchandiser in the correct order.

1) Purchase of inventory
2) Sale of inventory
3) Collection of accounts receivable
4) Payment of accounts payable

Answer 1

The correct order for the operating cycle of a merchandiser is: 1) Purchase of inventory, 2) Sale of inventory, 3) Payment of accounts payable, 4) Collection of accounts receivable. Merchandise and current account balances are calculated using transaction data. Cheques are payment instruments, and overdrafts occur when an account balance is negative.

Step-by-step explanation:

The operating cycle for a merchandiser is the sequence of events that a merchandising business follows from the purchase of inventory to the collection of cash from customers. The correct order for the operating cycle is:

1. Purchase of inventory
2. Sale of inventory
3. Payment of accounts payable
4. Collection of accounts receivable

Merchandise balance and current account balance can be calculated using the values of goods, services, and income payments. This calculation requires organizing financial transactions in a ledger or table format, after which the balances can be obtained by subtracting total credits from total debits. A business needs to monitor these balances to ensure liquidity and financial health.

A cheque is used as a payment instrument to pay for goods and services. When a store accepts a cheque, it deposits the cheque into its bank account, and the bank processes the payment. If a cheque is issued without sufficient funds in the account, it may result in an overdraft, which means that the account balance goes below zero, incurring fees and penalties.