CVS Corporation fills over 366 million prescriptions each year and generates annual revenue in excess of $30 billion. Approximately 30 percent of its revenue comes from the sale of nonprescription medications, health and beauty aids, convenience foods, greeting cards, and other household products. The company has invested heavily in information systems used to warn customers of potential drug interactions, to automate prescription refills, and to track detailed sales and inventory data from each of its stores.
CVS Corporation's financial statements are similar to those of the service organizations illustrated in previous chapters. They differ, however, because in addition to providing the services of registered pharmacists CVS also sells merchandise to its customers. Companies that sell merchandise must report information about inventory costs in their financial statements.
AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO:
Understand the components of a merchandising company's income statement. |
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Account for purchases and sales of merchandise in a perpetual inventory system. |
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Explain how a periodic inventory system operates. |
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Discuss the factors to be considered in selecting an inventory system. |
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Account for additional merchandising transactions related to purchases and sales. Define special journals and explain their usefulness. |
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Measure the performance of a merchandising business. |
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Describe the operating cycle of a merchandising company. |