Which of the following is TRUE for a service company?
A) Expenses are all period costs.
B) Expenses are all product costs.
C) Income statement includes gross profit.
D) Balance sheet includes finished goods inventory.

Question

Quizplus · Accepted Answer

A service company has no inventory or cost of goods sold, as it does not produce any tangible goods. Therefore, all its expenses are considered period costs and are expensed in the period they are incurred.

Option B is incorrect since a service company does not produce any tangible goods, and hence, there are no product costs.

Option C is incorrect since a service company does not have a gross profit as there is no cost of goods sold.

Option D is incorrect since a service company does not have a finished goods inventory, as there is no production of goods.

Which of the Following Is TRUE for a Service Company