Service products in the corporate management accounts program

What is the service class?

The service category is the intangible product "service" and there is no actual quantity in the store, but we sell it and it gives us the revenue, which is often linked to another tangible product .

As if I sell, for example, an air conditioner product as a tangible product with an installation service, or I sell computers as a tangible product with a new Windows download service, or if I sell a ceramic product with a transport and delivery service

 

 What is the advantage that I differentiate between the tangible product and the service product?

The proactive accountant who organizes his work perfectly must know how to separate the main types of revenue and record each revenue independently.

This is very important, and it will differentiate with us in the reports after that, as we can easily know the sources of revenue from where It comes exactly, and this product is really profitable or not, and will the service that we provide have a real benefit in that it increases the volume of sales or not?

 

When I give the customer one invoice explaining the type of products that they take, and also explaining the correct cost of the product and will avoid any confusion.

 

How do I make my accounting entry properly?

Assuming that you sold computers and servers to the customer with your money, the selling price of these devices was 10,000 pounds, and in addition to this, the IT department sold one of its employees in order to install the devices at the customer and make them network with each other, and the cost of this service was 1000 pounds. What is the most accurate entry?

 

The first thing you do

is that you give the invoice to the customer, explaining in detail the price of the product and the cost of your service

 

 Even if a tax invoice will be deducted from the 14% value-added tax (V.A.T)

 

Secondly,

by registering the entry in this form

1) By confirming that your product has left the store at a cost of "virtual numbers"   

Account of the sales cost 5657

To the stock account 5657

 

2) Proves that the invoice is due to the customer at the sale price

Of those mentioned

Al-Quds Company customer account 12485
 

55 Accounts for commercial and industrial profits ".05%"
 

   To those mentioned

  Sales revenue 10,000
 

 Services revenue 1,000
 

1540 a value added Tax of "14%"

 

The most important service activity problems and their solutions in the affiliate program groups of Accflex

* The most important accounting problem that can be encountered in the service activity is the method of revenue recognition, which certainly differs from one company to the other depending on the nature of the service provided, for example in the case that the company provides a specific service, which is the sale of accounting programs to companies, and this type of activity is required with the sale of service-providing account programs Warranty or technical support

 

Thus, accounting software revenue is recognized separately in the year of sale. As for the service provided, only what is specific to the year is recognized, let's see that with a practical example:

 

_ Al-Hadaf Computer Systems Company (producer of Accflex Accounts Program Group) contracted with Excellence for Auto Trade company to supply an accounts program to manage the activity with technical support service for a period of two years. The total value of the contract amounted to 15,000 US dollars at an exchange rate of 17 pounds to the dollar (divided into 10,000 dollars)

 

The total value of the programs is +5000 dollars, the value of the technical support service). If the contract is signed and the implementation begins on 1/1/2018
 

What are the journal entries required to prove previous transactions during 2018 and 2019?

Daily entries in 2018: *
 

255,000 From the customer's account
 

To those mentioned:
 

170.000 Account revenue from selling programs

42,500 Revenues from technical support services

42, 500 Revenues of technical support services provided.

 

Daily entries in 2019 *

 

42,500 Revenue from the technical support services revenue account provided. 

To

42500 a technical support income account

 

We note in the previous case that it has been:

1- Separating the types of revenue by dividing them into two types of revenue, program sales revenue and technical support revenue.
 

2- The revenues from selling the programs were fully recognized in order to transfer the benefits and risks to the customer, and the year was recognized for the revenues of technical support due to the benefit of more than one period of the revenue
 

3- The remaining part of the revenue was recognized in 2019