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Brent Blanchard
Brent Blanchard, Attorney
Category: Business Law
Satisfied Customers: 1975
Experience:  Thirteen years of business law experience, from business formation to litigation
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1. What is the distinction between service and merchandising

Customer Question

1.What is the distinction between service and merchandising companies? What is the distinction between merchandising and manufacturing companies? What is the distinction between retail and wholesale merchandising companies?
2.Summarize the primary purposes of an internal control system.
Submitted: 8 years ago.
Category: Business Law
Expert:  Brent Blanchard replied 8 years ago.
It would be best for you to expand on these core concepts using the language of your instructor or textbook, perhaps even with analogies parallel to those used in the course:

1.a. The focus of a service company is to provide services, even though some "goods" may be included as part of the services. Services include most forms of labor or other activities which have a marketable value, such as washing a person's car. "Goods", by contrast, are the focus of merchandising companies. "Goods" fall within the legal definition of "personal property", meaning objects that can be picked up and carried away. A merchandising company sells goods, and any services included (such as installation of a computer system, for example), and a minor or incidental part of the business focus.

1.b. Merchandising companies, as stated in 1.a. above, are focused on selling goods. Manufacturing companies are engaged in the business of converting raw materials or component parts into finished products, or goods. Automobile factories are one example of a manufacturing company, as they use a mix of raw materials such as sheet metal which they fabricate into car parts, and components manufactured or assembled by sub-contractors or vendors, and assemble them into finished products.

1.c. Though sometimes a blurry distinction if there are several layers between the manufacturer and the end-user or consumer, the differences between wholesale and retail merchandising companies lie in where the business's primary customers are:
i). If the merchandising company sells exclusively to end-users or consumers, it is a retail merchandiser. Typical transactions are either one-of sales, or sales in small quantities almost always intended for use by individual household consumers or end-user businesses.
ii). Wholesale merchandising companies (wholesalers) sell to distributors and/or dealers who then re-sell the same merchandise to their customers. A wholesaler will typically sell the goods in large lots rather than one-of sales.

2. The primary purpose of an internal control system is to ensure that company funds are properly received, tracked, accounted for, and distributed as appropriate for the company's financial needs. In other words, internal controls assure that there are no "cracks" though which funds can fall and be lost or unaccounted for.

Thank you.