Get to know Service Company Accounting: Definition, Stages and Types of Transactions

Get to Know Accounting for Service Companies – Accounting for service companies is actually almost the same as accounting in general. What distinguishes it is the absence of control over merchandise with a general cycle. Let’s Get to Know the Accounting for Service Companies in More Depth, along with a more complete explanation. Check them out!

Accounting and Service Companies

Service companies according to Phillip Kotler are companies that offer an element that is intangible but the benefits can be felt. In addition, there is no transfer of ownership in this transaction. If the money has been paid in a service purchase, the buyer no longer gets any additional items that he can take home.

Meanwhile, according to William J. Stanton, who is also the author of a book entitled Fundamentals of Marketing, service companies are companies whose job is to sell various services, where services are something that can be identified separately and have no concrete form, services themselves are offered to be able to meet various needs of a person. .

These services can be produced using a variety of tangible and intangible objects. Service companies are companies that sell various intangible products or services with the main goal of making a profit. Service companies themselves carry out business activities as follows:

  • Business in educational services or courses such as language courses, schools, tutoring
  • Accommodation services such as hotels, hostels, mess.
  • Services to Communication service providers such as television, cellular, radio.
  • Body care services such as spa services and salons
  • Professional services such as accountants, doctors, financial consultants, to tax consultants.
  • Travel services such as selling travel packages, buses, and so on.
  • Repair and installation services such as cell phone repair, or workshops.

Sinaumed’s can study basic accounting, especially for service companies, in the book Accounting for Service & Trade Companies by Made Ary Meitriana et al which is below.

 

Service Company Example

According to William J. Stanton, who also wrote a book entitled Fundamentals of Marketing, he describes service companies as companies that sell services, where services are something intangible but can still be identified separately, services are also used to meet the various needs of their consumers’ lives. Examples of service companies in Indonesia that are listed on the IDX include:

  • Property & Real Estate, including Agung Podomoro Land Tbk, Alam Sutera Reality Tbk, Bekasi Asri Pemula Tbk, Bumi Citra Permai Tbk, Bekasi Fajar Industrial Estate Tbk, Bhuawanatala Indah Permai Tbk, Bukit Darmo Proerty Tbk and Sentul City
  • Construction & Building Service Companies, including Acset Indonusa Tbk, Adhi Karya (Persero) Tbk, Totalindo Eka Persada Tbk, Duta Graha Indah Tbk, Nusa Raya Cipta Tbk, Paramita Bangun Sarana Tbk, Housing Development (Persero) Tbk, Total Bangun Persada Tbk, Surya Semesta Internusa Tbk, Wijaya Karya (Persero) Tbk, Waskita Karya (Persero) Tbk
  • Infrastructure, Utilities & Transportation, including the State Gas Company (Persero) Tbk, Rukun Raharja Tbk, Cipta Marga Nusapala Persada Tbk and Jasa Marga Tbk
  • Telecommunications Service Companies, including Telekomunikasi Indonesia Tbk, Indosat Tbk
  • Transportation service companies, including National Shipping Bina Buana Raya Tbk, Blue Bird Tbk, Capitol Nusantara Indonesia Tbk, Cardig Aero Service Tbk and Garuda Indonesia (Persero) Tbk
  • Financial Services Companies, including Bank Bukopin Tbk, Bank Mestika Dharma Tbk, Bank Nusantara Paahyangan Tbk, Bank Yudha Bhakti Tbk and Bank Jabar Banten Tbk\
  • Financing Institutions, including Buana Finance Tbk, BFI Finance Indonesia Tbk and Indomobil Multi Jasa Tbk
  • Hotels, Restaurants & Tourism, including Bayu Buana Tbk, Bukit Uluwatu Villa Tbk, Fast Food Indonesia Tbk and Saraswati Griya Lestari Tbk
  • Health, including Mitra Keluarga Karya Sehat Tbk, Prodia Widyahusada Tbk, and Sarana Meditama Metropolitan Tbk
  • Computer services and other facilities, including Multipolar Technology Tbk

With so many companies providing and selling services produced by a professional activity, there are also many management companies that must meet general requirements. Learn how to in the book Managing a Professional Services Company below.

 

Service Company Character

After discussing the many definitions of service companies above, it can be concluded that this company has various characteristics, including:

1. Selling Services as the Main Activity

Service companies are not companies that produce a product, therefore their main activity is to offer and sell a service that they have.

2. Not Providing Products in Physical Form

Services themselves have an intangible form so that service companies certainly do not sell products that can be seen or stored. Even though the product cannot be seen, the benefits can be felt by consumers or users.

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3. Results cannot be equated

The results of business in a service company are also very subjective, it depends on customer satisfaction. Thus, the results of their efforts cannot be beaten evenly to all consumers. The reason is the measure of satisfaction of each person is different. In addition, the quality of employees also depends on health, psychological conditions, and so on.

For example, employees with morning to evening shifts must have different services, services in the morning are definitely more excellent than services performed in the afternoon when the employee’s condition is exhausted, apart from that there is no Cost of Production, the characteristics are also very different from service companies of other types of companies. where of course there are no sales and cost of production in it.

Service companies also do not carry out various production activities, so they do not need production raw materials. This will then affect its financial statements, where in service companies there is no information about the cost of production and sales.

In the financial statements themselves there are various forms such as profit and loss reports, reports on changes in equity, reports on changes in financial position, and much more that you can learn in the book Easy Ways to Prepare Financial Statements for Service Companies.

 

4. There is no common price standard

Generally, customer needs will always vary depending on the wishes and complaints they have. So that the price of services then cannot be set and must be adjusted to each customer’s needs.

5. Service Company Accounting Cycle

As with various other types of companies, service companies also require various financial reports. In designing these financial statements, it is very important to understand the accounting cycle of service companies. Thus the resulting financial reports will then be good and correct. The following is a service company accounting cycle:

Stages of the Service Company Accounting Cycle

Each transaction recording requires major components such as purchase or sale notes, transaction value including taxes, income or expenses, debt or receivable controls. The use of service company accounting software will help make it easier to record these transactions. Here are some pictures of the input form and the ledger.

 

1. Perform Transaction Analysis

The first step is, of course, analyzing transactions that have taken place within a period. Paired journal accounting system as a tool used to analyze transactions.

In using this system it is very necessary to have an analysis of a transaction, how to understand the explanation of the transaction to determine whether the transaction is included in the asset, liability, capital, income or expense items and then determine the effect of the transaction on these items, increase or decrease. Follow the credit debit rules for recording transactions.

Examples of document sources that are often encountered are receipts, sales invoices, purchase invoices, cash receipts, work hours cards, and so on.

2. Make an Accounting Journal

A journal is an activity of writing the type of account accompanied by the amount along with evidence of transactions that have been collected previously, to be recorded in a daily journal, also known as a general journal. The next step in creating a cycle is to make a journal entry for each transaction.

If you use a cashier or point of sale application, it usually helps the company get through cycles 1 and 2, but the company also keeps track of their expenses. Record transactions in a journal with details based on the data obtained to facilitate the next cycle.

The choice between accrual and cash accounting will determine when transactions are formally recorded. Keep in mind, accrual accounting requires matching income with expenses so both must be ordered at the time of sale. Meanwhile, cash accounting requires transactions to be recorded when cash is received or paid. The next option is recording single entry and double entry.

Single entry is the recording of financial transactions only once with transactions affecting the cash account. Double entry is the recording of financial transactions twice on debit or credit in order to produce a profit or loss or balance sheet.

3. Posting Accounting Transactions from Journal to Ledger

The next step is to post all transactions to the general ledger. The ledger itself is a collection of bookkeeping accounts, each of which is then used to record information about a particular asset. For convenience, classify financial transaction data based on the date, type of transaction, account number and name.

Thus all company transactions in journals that are also linked to cash will enter the cash ledger. After that, calculate the balance of each account in the general ledger to find out the total value of the account.

4. Preparation of Trial Balance

Making a trial balance or balance is one of the service company accounting cycles that must be carried out. The trial balance itself serves to prove that the credit and debit sides are balanced. If the number of both is balanced, it will help reduce errors in data input. How to make your own trial balance, including by copying or citing the balances of all accounts in the ledger. Therefore, calculating the ledger balance will play a very important role at this stage.

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5. Make Adjusting Journals

The next step is the preparation of adjusting entries. Making adjusting journals is done if there are errors in journalizing and posting or ensuring costs and income have really been recorded in the right period. If at the end of the accounting period, there are transactions that have not been recorded, there are transactions that are wrong or need to be adjusted, then they are recorded in an adjusting journal.

Adjustments are generally made periodically, usually when the report is to be prepared. Then, you also have to create a second trial balance by transferring the adjusted balance in the general ledger into the new trial balance. The balances of the accounts in the general ledger are grouped into assets or liabilities. The balance between the assets and liabilities groups on this trial balance must also be balanced. For example depreciation of equipment, unpaid rent and so on.

6. Make a column balance

A work balance is created based on adjusting entries and a trial balance. The work sheet contains information regarding adjusting journals and trial balance which will produce information such as profit, loss, balance sheet, and various other information needed in preparing future financial reports.

7. Compile Financial Reports

Financial Report as one of the accounting cycles in which there are reports of profit, capital, loss, up to the balance sheet. The financial statements themselves are the main and most important results in an accounting cycle. Financial reports can also be directly prepared from a trial balance, as well as working papers that have previously been adjusted from a general ledger. This financial report is also prepared as a profit and loss statement, balance sheet, cash flow statement and report on changes in capital.

Accounting which is the art of recording transactions, grouping accounts into ledgers, is presented through financial reports that you can study through the Service Company Accounting Practicum book.

 

8. Make a Closing Journal

After designing financial reports, you must also make closing entries which are usually made at the end of the accounting period. This closed account itself is only a profit-loss account or a nominal account. You do this by emptying the associated account nil. The nominal account itself must be closed because this account can be used to measure the flow of resources that occur in a period.

9. Make a Reversing Journal

A reversing journal is a journal that contains the stages of reversing several accounts that have been closed to restore their balances. This reversed estimate account is then an advance payment before maturity. This reverse journal is actually not required to be made, although in some transactions this reverse journal must be made.

10. Final or Beginning Balance Sheet

What is referred to as the final or initial balance here is the final balance produced at the end of the period which will later be used as the initial balance in the next period’s accounting cycle.

Types of Service Company Accounting Transactions

Differences and characteristics of companies cause differences in the various transactions that exist in a service company. Here are some types of service company accounting transactions that you need to know:

1. Purchase

This purchase transaction is an activity carried out to buy a product. Purchasing transactions for service companies themselves include the purchase of work equipment and tools. Everything is done to provide satisfaction to customers in terms of service.

Furthermore, service companies must also record various other transactions related to purchasing transactions. For example, at the Beauty Salon, you make a purchase in the form of a hairdryer, scissors, flat iron, hair vitamins at Toko Merah Merona, so after the purchase is made you must immediately record it in your business’s books of account.

2. Income

Like other companies, service companies also have various objectives to gain profit. This income must be recorded in the cash and credit register. Income from the service company itself, among others, is obtained from the various services it has provided. Therefore, service entrepreneurs will provide the best services to their customers.

3. Payment of Other Expenses

In addition to expenses made when buying various necessities such as various equipment and tools. Service companies also have various fees that must be paid, for example electricity bills, telephone administration, internet, and others.

4. Receipt of Receivables

Receivables as gifts or sales made on credit to users. So that according to the agreement or consumer policy which will then pay off payments at a certain time, company records are needed in this case.

5. Investment or Investment

When the first service company was established, there must have been a deposit of capital from investors and owners. All of these investment transactions must be properly recorded. Especially if the capital or funds come from other parties.

Learn more about service company accounting such as its accounting cycle and accounting records in the Accounting for Service, Trade and Manufacturing Companies below.

Thus the discussion of the service company accounting cycle. By applying the correct accounting stages, business activities can then be carried out effectively as well as helping to make decisions more precisely because they are carried out based on real financial information. Thus the info, hopefully useful!

Book of Recommendations Concerning Service Company Accounting

 

1. Introduction to Accounting Second Edition

2. Introduction to Accounting 1: The Accounting Cycle Approach

3. Financial Accounting

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