Services

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.