Does Service Revenue Have A Credit Balance

4 Min. Read

Is Service Acquirement an Asset? Breaking down the Income Statement

March 28, 2019

Is Service Revenue an Asset? Breaking down the Income Statement

Service revenue is the income a visitor generates from providing a service. The amount is displayed at the top of an income statement and is added to the revenue from product earnings to show a company'due south total revenue during a specific fourth dimension flow. In a double entry arrangement of accounting, service revenue accounting entries reflect an increase in a company's asset account.

Here's What We'll Encompass:

What is Service Revenue?

What Are the Types of Revenue?

Why Are Service Revenues a Credit?

NOTE: FreshBooks Back up squad members are non certified income tax or accounting professionals and cannot provide advice in these areas, exterior of supporting questions about FreshBooks. If y'all need income tax advice please contact an accountant in your area.

What Is Service Revenue?

Service Acquirement is income a company receives for performing a requested activity. The charges for such revenue are recorded nether the accrual method of accounting. Accrual bookkeeping records the dollar amounts for a accuse when a transaction occurs, not when the greenbacks is actually exchanged. This means all fees for services performed to date tin can be included in an income statement, even if not all the bills have been sent out to clients all the same.

Service revenue appears at the superlative of an income statement, and is separated but added to the product sales for a acquirement total. An income statement is not concerned with greenbacks menstruation, information technology is concerned with revenues, gains, expenses and losses in both the operating and not-operating activities of the business during a specific menses of fourth dimension.

A revenue section of an income statement, for a service-oriented company, could look something like this:

Pete's Plumbing

Revenues
Product Sales: $9,875
Service calls: $88,000

Total Acquirement: $97,875

You'll discover that Pete does very little in product sales, that's because about of his business is in the bodily service of fixing things for his customers. The lesser of his income statement volition show y'all his visitor's cyberspace income, later expenses take been removed.

Income Statement: Pete'southward Plumbing

Revenues
Production Sales: $9,875
Service calls: $88,000

Total Acquirement: $97,875

Expenses
Wages (part time help) $8,000
Vehicle Expenses $ii,000
Holding Revenue enhancement (domicile office) $ane,000
Insurance $2,000
Supplies $4500
Phone $600
Advertising (Facebook) $600
Banking $500
Income Taxation Expenses $8000

Total Expenses: $27,200

Cyberspace Income: $70,675
(Revenue - Expenses)

Income statements are very important to a company'due south direction, as it shows the direct relationship between revenue and expenses, and if the visitor is profitable.

What Are the Types of Revenue?

There are 2 types of revenue, "Operating Acquirement" and "Non-Operating Revenue":

Operating Revenue

This is the amount of income generated from a company's master source of business organization. For instance, revenue from Pete's Plumbing would be considered "Operating Revenue" because everything he makes is straight related to his plumbing business.

Non-Operating Revenue

This is the amount of income generated from a company's side activity, such every bit investments. Let's say Pete builds his local enterprise into a plumbing empire with a chain of well outfitted plumbing vans manned by experienced personnel, operating in five states. He invests some of the company'southward profits into other businesses. The profits returned on those investments would exist considered "Non-Operating" revenue.

Why Are Service Revenues a Credit?

When accountants tape transactions in a company's general ledger, typically they utilize a double entry arrangement of accounting for their bookkeeping. A double entry organisation requires every entry to take an boosted corresponding entry to a different business relationship. Consider the word "double" in "double entry" continuing for "debit" and "credit". The two totals for each must balance.

For more on the double entry arrangement of accounting, click hither.

Let'due south say Pete does a plumbing chore that he charges his customer $600.00 for. When doing his bookkeeping, Pete volition tape this credit nether the heading "Service Revenues". Pete likewise needs to rest this credit with a debit, and then he will debit his "Accounts Receivable" (an asset account) with $600.00.

RELATED Manufactures