There are three different types of companies and each type of company will have a slightly different in term of financial statement presentation and cost management also. The main difference is with the cost of goods sold. A manufacturing company uses labor and other inputs to transforms raw materials into finished product and then sells the product, like a merchandising company. But in service company does not produce/sell products, instead it provides service.
So service companies usually don’t have a cost of goods sold as they aren’t selling a product, they are selling an idea. As the other two company types; Manufacturing, Merchandising Company are selling a tangible product, they will have a cost of goods sold.
1.1 How are they different in term Cost accounting?
Title | Manufacturing company | Merchandising company | Service Company |