The specificity of service provision activity is that the idea of finished products is absent in those entities. Total expenses incurred in an accounting period (financial) can be divided into a part concerning a given period and a part concerning subsequent periods. Expenses related to a current financial period can be divided into those which concern cost of sales, i.e. finished services, and cost of ongoing services – called unfinished production.
As a rule, the most important cost factor in service provision is the cost of labour. When creating company’s cost accounting, this main factor should be specified and used for determining a significant cost driver.
Depending on the nature of service provision activity, duration, repeatability (cyclicality), possibility to divide into stages, etc., a defined method of unfinished production measurement should be applied in order to ensure correct service accounting. The best solution in case of repeated, temporary services is to adjust a billing period so that it coincides with accounting periods. Then, there is no collision with solutions adopted by fiscal law.