This Is the Difference Between Financial Statements of Trading, Service and Manufacturing Companies

In any industry, whether it is a trading company, service, or manufacture, certainly has various departments with their specific tasks. In plain view, these departments appear to have no dependence on each other. However, in recording financial statements, in the end they will be connected by one party named the accounting and finance department.

The accounting and finance department will be tasked with recording each company’s activities and actions related to money in a period of time. After that, they will arrange everything neatly in the form of financial statements. They then conveyed it to various stakeholders, such as investors, creditors, or the government with their government institutions.

Financial statements are also often regarded as accounting end products. That is, the report serves as a service activity that aims to provide quantitative information and is useful in making economic decisions. A financial statement consists of several main components, namely a balance sheet, a profit and loss statement, a cash flow statement, and a report on changes in shareholders’ equity.

According to the International Accounting Standard Board (IASB) contained in the EDUpristine website, the main purpose of financial statements is to provide information about position, performance, and changes in financial position. This information will be used by many parties, some of which are: company management to plan, analyze, benchmark, and make decisions for a company; investors, promoters, or creditors to assess whether the company is eligible for financial assistance; or also useful for shareholders to find out various aspects that occur in a company.

Then, from all the explanations above, is there anything that distinguishes the preparation of financial statements for trading, service and manufacturing companies?

The answer is yes, but not much. If viewed from the perspective of the overall accounting process, the preparation of financial statements between trading companies, services, and manufacturers does not have a big difference. One thing that differentiates the three industries above is only about the company’s products.

Trading Company Financial Report

In trading companies, the products being traded are finished objects. The sales system is only by reselling the product to others while raising the initial price slightly. This price difference is the business advantage of a trading company. While in manufacturing companies, products that are traded are more varied. This product can be in the form of finished goods, raw materials that must be processed first, or processed raw materials but still in the form of raw materials.

Generally, financial statements of trading companies are divided into several types. They are income statement, balance sheet, cash flow statement, and statement of changes in capital. Each type of report has a function and provides different data, depending on the needs of your trading company.

Service Company Financial Report

Products in service companies are the most different. If the previous industry emphasized goods as a business product, the service company carried out its business activities by selling certain services. Therefore, differences in financial statements in all three industries are in the inventory and purchase section.

When a purchase occurs at a service company, it will usually be included as equipment or equipment. In the financial statements of service companies, there is no cost of goods sold (HPP) or applicable cost accounting.

Manufacturing Company Financial Report

Quoted from the Accounting ID website, inventory and purchase of a trading company consisting of several types. They are inventories of merchandise, buyers, and there are cost of goods manufactured. However, for manufacturing companies, supplies and purchases consist of inventory of raw materials, inventory in the production process, supplies of auxiliary materials, inventory of finished goods, purchases, and there are product sales prices (HPP) and cost accounting.

Whereas because service companies do not sell products, they do not have inventory and cost of goods sold. All types of purchases at service companies will fall into the category of equipment or equipment.

Now, you already know the basic difference between the financial statements of trading companies, services, and manufacturers – which are distinguished from the types of business products. However, whatever product you sell, you can arrange financial statements more easily and practically by using Sleeker Accounting. This cloud-based accounting software allows you to control financial statements in real time and is safe from anytime and anywhere.

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