Services Rendered: Definition, Meaning, Accounting, Examples

The accounting for goods sold to customers is straightforward. When a company delivers goods, it records an expense while reducing inventory. Similarly, it accounts for the revenues generated from those goods. For services, however, the process may differ, which falls under services rendered. Before understanding its accounting, though, it is crucial to understand what it is.

What are Services Rendered?

Services rendered is a term used to describe the conclusion of a service contract between a renderer and the client. In some cases, the process of providing services may involve a continuous or long period. Similarly, service providers may also receive payments in advance for those services. Therefore, it is crucial to separate those collections from any work delivered to the client.

Add your business to our business directory https://harbourfronts.com/directory/ Add your business. Also check out other businesses in the directory

In essence, the term services rendered refers to the act of providing a service to a client. This definition also applies to accounting and how to record those services. Usually, when companies complete the provision of service, they send an invoice to the client. This invoice serves as a base in the accounting for those services rendered.

What is the accounting for Services Rendered?

Like the delivery of goods or products, services rendered has two accounting aspects. The first relates to the recognition of the expenses incurred for those services. Usually, companies account for these as they occur, which is in line with the accruals concept in accounting. The process involves identifying each expenditure and allocating it to the relevant account.

In the case of goods and products, those expenses become a part of the cost of goods sold. For services, however, they contribute to the cost of services. Overall, when companies incur expenses for services rendered, the journal entries will be as follows.

Dr Service expense (Cost of services rendered)

Cr Accounts payable or Cash/Bank

The other aspect involves recognizing revenues for those services rendered. Usually, companies obtain these amounts from the contract with the client. In some cases, companies may also use a fixed rate for every unit of services rendered. Once established, they will send an invoice to the client requesting a payment. Using this invoice, companies can record the services rendered revenues as below.

Dr Accounts receivable

Cr Service revenues

In some cases, the client may also have paid for the services in advance. Companies record those payments as prepayments or advances. Similarly, some clients may pay for those services at the same time as they get rendered. In either of these cases, the essential journal entries for services rendered will remain the same. However, the relevant accounts will differ.

Example

A company, Green Co., provides accounting services to a client. The contract between both parties dictates the client must pay an annual fee of $50,000 for those services. For Green Co., the services rendered expense is $30,000. At each year-end, the company sends an invoice to the client requesting the contractual payments.

For the services rendered expenses, Green Co. records the following journal entries.

Dr Service expense $30,000

Cr Accounts payable $30,000

Similarly, the company records the revenues for the services rendered as follows.

Dr Accounts receivable $50,000

Cr Service revenues $50,000

Conclusion

The term services rendered describes the conclusion of a service from a provider to a client. The accounting for services rendered involves two aspects. Firstly, it records the expenses related to those services. The second aspect includes accounting for the revenues from services rendered. Usually, these figures come from the contract between both parties.

Further questions

What's your question? Ask it in the discussion forum

Have an answer to the questions below? Post it here or in the forum

LATEST NEWSStocks slide with all eyes on debt-ceiling vote: Stock market news today
Stocks slide with all eyes on debt-ceiling vote: Stock market news today
Stay up-to-date with the latest news - click here
LATEST NEWSKey product announcements boost NVIDIA's AI position - BofA
Key product announcements boost NVIDIA's AI position - BofA
Stay up-to-date with the latest news - click here
LATEST NEWSUK has bigger core inflation problem than other economies - BoE's Mann
UK has bigger core inflation problem than other economies - BoE's Mann
Stay up-to-date with the latest news - click here
LATEST NEWSSkyline Corporate Communications Group, LLC Joins the Canadian Securities Exchange Directory as an Approved Service Provider for Investor Relations Services
Skyline Corporate Communications Group, LLC Joins the Canadian Securities Exchange Directory as an Approved Service Provider for Investor Relations Services

NEW YORK, May 31, 2023 (GLOBE NEWSWIRE) — Skyline Corporate Communications Group, LLC (“Skyline” or the “Company”), a consulting agency that provides customized corporate communications and strategic investor relations advisory services to publicly traded and pre-IPO companies, is pleased to announce its approval as a…

Stay up-to-date with the latest news - click here
LATEST NEWSIZEA Wins Three Gold Awards at 2023 TITAN Business Awards
IZEA Wins Three Gold Awards at 2023 TITAN Business Awards

Company Honored for Excellent Achievement in Influencer Marketing Campaigns Orlando, Florida, May 31, 2023 (GLOBE NEWSWIRE) — IZEA Worldwide, Inc. (NASDAQ: IZEA), the premier provider of influencer marketing technology, data, and services for the world’s leading brands and agencies, today announced that it won three…

Stay up-to-date with the latest news - click here

Leave a Reply