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E6.31 LO6.12 6.13 Flow of costs: travel agency and retailer In this chapter, the income statement of Adelaide Bank (Exhibit 6.13) is typical of many
E6.31 LO6.12 6.13 Flow of costs: travel agency and retailer In this chapter, the income statement of Adelaide Bank (Exhibit 6.13) is typical of many service firms' statements, in that operating profit (consisting of the difference between operating revenue and operating expenses) is separated from other (non-operating) items. However, the income statement of a retailer (Exhibit 6.14) more closely resembles that of a manufacturing organisation, as the need to consider the cost of sales causes us to recognise the direct profits of selling merchandise (gross profit) separately from the financial effects of other activities. Required: Refer to Exhibits 6.13 and 6.14 and answer the following questions. 1. List the major differences between the income statements and balance sheets for a travel agency and a department store 2. On the income statement for the travel agency, where would the sales staff salaries be shown? 3. Where would the costs of the computer equipment used to keep track of reservations be included in the income statement for the travel agency? 4. Where would the costs of advertising be shown in the income statements for the department store and the travel agency? 5. Where would the cost of merchandise be shown in the department store's income statement and balance sheet? 6. Where would the costs of stationery used to print travel itineraries be shown on the travel agency's income statement and balance sheet
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