SERVICE FIRMS

Transition Year powerpoint by Hugh

McDonagh and Cathal Kelly
OVERVIEW
By definition, a service firm is
Abusinessthatmakesitsfacilitiesavailablet
oothersfora fee.
This means it sells or provides a service rather
than a physical good. E.g. A barber provides a
service but a grocery provides goods.
Service firms account for approximately 70% of
jobs in Ireland.
EXAMPLES
WHY DO SERVICE FIRMS KEEP
ACCOUNTS?

They are required to keep accounts by the

revenue commissioners.
To find out if the business made a profit or a
loss.
To find the value of the business.
Accounts are required to apply for grants or
loans.
THE BOOKS
Service firms keep the
following accounts.
q Analysed Cash Book
q Operating Statement
q Balance Sheet
ANALYSED CASH BOOK

An analysed cash book is a T-account which allow a

business to see the businesses ACTUAL income
and expenditure.
Money on the left side of the analysed cash book is
received. This is the debit side. Money on the
right side of the analysed cash book is paid. This
is the credit side.

OPERATING STATEMENT
This is the trading, profit & loss
account of the service firm.
Formula the exact same, just a
different name
Used to find gross profit, total
operating expenses and operating
profit
 Operating Statement for Company XYZ, Inc.
for theyearended December 31, 2008
Total Revenue 100,000
Cost of Goods Sold ( 20,000)
Gross Profit 80,000
Operating Expenses
Salaries 10,000
Rent 10,000
Utilities 5,000
Depreciation 5,000
Total Operating Expenses ( 30,000)
Operating Profit(EBIT) 50,000

THE BALANCE SHEET

The balance sheet presents a

company's financial position at the
end of a specified date.
This is combined with the operating
statment to form a single question, so
being accurate and consistent is vital.
Used to find the working capital and
the capital employed.
 Current Assets Current Liabilities
Any bill, that is an Any bill, that is an
expense to the expense to the
company that is prepaid company that is due
Any bill, that is owed to Any bill, that was owed
the company that is due to the company that
was prepaid

ASSETS VS LIABILITIES
SAMPLE