A company buys and sells goods to earn a profit 2 The primary source of revenue in merchandising company is purchases 3 The cost of goods available for sale is the total cost of merchandise sold during the period 4 Operating expenses are incurred in the process of earning sales revenue (Examples: sales salaries and salaries expense) 5 Gross profit = sales revenue + COGS 5 Net income = gross profit - operating expenses 6 The cost of goods sold under a periodic inventory system = the beginning inventory - purchase + ending inventory