Which of the following is true of service companies?
A)All of service companies' costs are product costs.
B)Service companies modify and resell products they buy from manufacturers.
C)Revenues of service companies are only recorded on cash receipt.
D)Service companies carry no inventories of products for sale.

Question

Quizplus · Accepted Answer

Service companies do not sell physical products and therefore do not carry inventories of products for sale. Instead, they provide intangible services such as consulting, legal or accounting services, healthcare, etc. Option A is false because service companies also have other costs such as salaries, rent, and utilities. Option B is incorrect as service companies do not buy products from manufacturers to modify and resell. Option C is also incorrect as service companies' revenues are recorded on accrual basis, same as for product-based companies.

Which of the Following Is True of Service Companies