Service business

Definition

A service business provides intangible products or services to customers rather than physical goods. These businesses rely on human effort and expertise as their primary value proposition.

5 Must Know Facts For Your Next Test

1. Revenues in a service business are recognized when the service is performed.
2. Service businesses often have lower inventory costs compared to product-based businesses.
3. Examples of service businesses include consulting firms, law firms, and cleaning services.
4. The main expense for service businesses is typically labor costs.
5. Service businesses track performance through metrics like client satisfaction and service delivery timelines.

Review Questions

Related terms

Revenue Recognition Principle:

The accounting principle that dictates when revenue should be recorded and recognized.

Intangible Assets:

Non-physical assets that add value to a company, such as trademarks or patents.

Labor Costs: Expenses related to compensating employees for their work, including wages, benefits, and taxes.