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There is enough service providing company.They dont buy or sell any materials,but just give some services?Like insurance companies,rela estate agents etc.How will be their income statements?What they update under const of sale,Sales,purchase etc.
As the insurance company's characteristic feature is service provider and not produce material and tangible products such as goods.the cost of sale will be the whole administarations expenses. e.g wages and salaries.stationary.communications expenses such as telephone ,fax,internet and postal mails, also may include production expenses in terms of commission that paid to the insurance producers.
Thanking You & Happy New Year.
For my service company, my contractors are my COGS while my three employees are classified as just payroll expenses AFTER the gross income. You really have to decipher your direct and indirect costs to achieve a sale to determine which were the COGS that actually provided the service and which are just the operating expenses for the whole good of the company.
In a service business, the cost of goods sold is considered to be the labor, payroll taxes, and benefits of those people who generate billable hours (though the term may be changed to "cost of services").
You can report your direct and indirect costs as expenses on the income statement. Each cost is individually reported as a line-item expense.
You can list the wages paid to your professional staff and support staff as two separate expenses to monitor your payroll costs.
Once you have all fixed and variable costs; that should be your cost of sales.
Then subtract that from what you charge, that is your profit.
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