Income Statement For Service Companies

The differences in income statements can be further understood by examining the balance sheets of both types of companies.

Income statement for service companies. Since service based companies do not sell a product the income statement will not contain cost of goods sold. The income statement one of the four principal financial statements is a bit different for manufacturing and service companies. Since service based companies do not sell a product the income statement will not contain cost of goods sold. Also called the profit and loss statement the income statement focuses on the revenue and losses of the company basically providing the company an overall view of their gains and losses in a specific period.

The income statement shows financial performance from operations first and then separately discloses gains and losses that fall outside the regular scope of operations. Companies that provide services such as ernst young accounting and accenture llp consulting do not sell goods and therefore have no inventory the accounting process and income statement for service companies are relatively simple. Major parameters included in income statement. Income accounts are presented before expenses.

Merchandising companies also called retail companies like macy s and home depot buy and sell goods but typically do not manufacture goods. Examples of service businesses are medical accounting or legal practices or a business that provides services such as plumbing cleaning consulting design etc. An income statement also known as profit and loss account is one of the financial statement that shows the income and expenses of a company for a specified time. Service companies have the most basic income statement of all the types of companies.

Then subtract all operating expenses. Therefore the income statement will be a basic breakdown of income and expenses. Generally accepted accounting principles give specific guidelines on the recording of transactions and the presentation of financial statements. Service companies have the most basic income statement of all the types of companies.

It is a good practice to arrange expenses according to amount largest to. Other income accounts for service type businesses include professional fees rent income tuition fees etc. In the above statement the income account is service revenue. Expenses are presented after the income accounts.

The income statement format above is a basic one what is known as a single step income statement meaning just one category of income and one category of expenses and prepared specifically for a service business.