Scribd
Upload
16 views12 pages

Acc1 Lesson Week5

The document discusses the three main types of businesses according to their activities: service companies which provide intangible services, merchandising companies which buy and sell tangible goods, and manufacturing companies which produce goods. It outlines the operating cycles, sources of revenue, advantages and disadvantages of each type of business. Examples are provided of common businesses that fall under each category of service companies, merchandising companies, and manufacturing companies.

Uploaded by

Kei
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
16 views12 pages

Acc1 Lesson Week5

The document discusses the three main types of businesses according to their activities: service companies which provide intangible services, merchandising companies which buy and sell tangible goods, and manufacturing companies which produce goods. It outlines the operating cycles, sources of revenue, advantages and disadvantages of each type of business. Examples are provided of common businesses that fall under each category of service companies, merchandising companies, and manufacturing companies.

Uploaded by

Kei
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 12

FUNDAMENTALS OF ACCOUNTANCY, BUSINESS

AND MANAGEMENT 1
TOPIC 5:
TYPES OF BUSINESS ACCORDING TO ACTIVITIES

Objectives:
 Compare and contrast the types of business according to activities
 Identify the advantages and disadvantages and business requirements of each
type
 Make a list of businesses in their community according to their activities
TYPES OF BUSINESS ACCORDING TO ACTIVITIES
A business is organization that converts inputs or resources such as material, labor, and overhead into
outputs which are usually either goods and services.
1) SERVICE COMPANIES
Service companies are firms that generally use their employees to provide intangible products or services to
customers. This type of business offers professional skills, advice and consultations. The primary source of revenues
of service companies is the performance of services, referred to as SERVICE REVENUES. Example, law firm,
Accounting firm, barber shops, beauty parlors, repair shops, banks, school, bus company, hospital and others.
- Once concept in business is the operating cycle.
- Operating cycle is the time it takes for a company to create products, sell these products, and collect cash
payments form customers.
- For service companies, the major phases of the operating cycle include paying out money for employees and other
operating expenses, performing the services, and collecting cash payments from customers.
OPERATING CYCLE OF SERVICE COMPANIES
SERVICE COMPANIES

Advantage Disadvantage
• Absence of inventory or • Because it relies heavily in
tangible goods held by the human capital, major
company. drawback is the inability to
standardize services as
services performed vary
from one client to another.
Thus, constant evaluation
and trainings are required.
2) MERCHANDISING COMPANIES

Merchandising Companies sell tangible products. This type of business buys at wholesale and later sells the products
at retail. They make a profit by selling prices that are higher than their purchase costs. This type of business is also
known as "buy and sell". Merchandising companies primarily earn revenues from the sale of goods or merchandise
also known as SALES REVENUE OR SALES.
2 types of Merchandising companies
a) Retailer- a merchandising company that sells goods directly to customers.
b) Wholesaler- merchandising company that sells goods to retailers.
OPERATING CYCLE OF MERCHANDISING COMPANIES
OPERATING CYCLE OF MERCHANDISING

The operating cycle of a merchandising company is typically longer than that of service company.
It starts with the purchase of goods to be held for resale, known as INVENTORY. The company eventually
sell the inventory to customers. The cycle ends with the receipt of cash payment.

Advantage Disadvantage
• The existence of tangible products • Holding inventory involves cost and
provides a leeway to merchandising regular monitoring
companies to make customers notice
their product.

Examples are: book stores, sari-sari stores, hardware stores


3) MANUFACTURING COMPANIES

Manufacturing companies or simply manufacturers, are relatively complicated organizations. Manufacturers


create their own products. This type of business buys raw materials and uses them in making a new product,
therefore combining raw materials, labor and expenses into a product for sale later on. Manufactures typically
employ large-scale production which is done in manufacturing plants. They earn revenues primarily from the sale
of manufactured products. The products of manufacturing companies can be sold directly to consumers, retailers,
and other manufacturers.
OPERATING CYCLE OF MANUFACTURING
OPERATING CYCLE OF MANUFACTURING

The operating cycle of manufacturing is generally has the longest period compared to service and
merchandising. The cycle has an additional phase which is the production of goods. These goods
are also held as inventory and later sold to its customers. Likewise, the operating cycle of
manufacturing company ends with the collection of cash payments.

Advantage Disadvantage
• Quality control of product wherein • Manufacturers need large sum of
manufacturing can ensure that their money to run productions facilities,
products meet the standards set. direct materials, overhead cost, labor,
Multiple quality inspections are utilities, rent, cost of quality control
carried out to detect spoilage and and cost of managing, handling and
prevent low quality goods, thus, storing manufactured goods.
customers notice it and promote sales

Examples are: shoe manufacturing businesses, car


manufacturing plants
ACTIVITY 5

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy