We know that both industrial and commercial companies must use the stock accounts found in “Group 3” of the General Accounting Plan during the year in their accounting. In the same way, at the end of the year, they will proceed to adjust the stocks with “subgroups 61 and 71” so that the balance sheet reflects the stocks that we actually have in the warehouse.

What we sometimes forget is that companies that provide services must also, on certain occasions, make this adjustment and reflect the amount of income accrued up to that moment in inventories. This will depend on whether we can count the income as such in Group 7 or, on the contrary, whether we cannot do so and we must register it as inventory.

Let’s consider two possible cases:

1st receipt of income from the provision of services

Valuation Rule 14 of the General Accounting Plan establishes a series of requirements to be able to recognize income from the provision of services. (705) These are the following:

1. The amount of revenue can be measured reliably.
2. It is probable that the company will receive the benefits or economic returns derived from the transaction.
3. The degree of completion of the transactions on the closing date of the financial year can be reliably assessed.
4. The costs already incurred in the provision, as well as those that remain to be incurred until its completion, can be reliably valued.

If it is fulfilled, we will record the income accrued up to the closing date, considering the percentage of completion of the service up to that date.

We see it in an example.

A company dedicated to carrying out market studies has been hired to carry out a specific study to be carried out from 01.10.17 to 01.04.18 for an amount of 20,000 euros (the total price of the service).

The costs that will be incurred to carry out the study are estimated at 10,000 euros. Their distribution will be 6,000 in 2017 and 4,000 in 2018.

 year 2017

For expenses incurred

For income, at the end of the year we impute the proportion of income that is considered realized. If the 6,000 euros of expenses represent 60% of the total, we can estimate that the income made is also 60%.

Year 2018

For expenses incurred

For income, at the end of the year we impute the proportion of income that is considered realized. In this case, it will be the 40% that we have left.

for the charge.

2: We cannot count the income from the provision of services.

In the case of not meeting the requirements of valuation rule 14, we must refer to rule 10 of the accounting plan, which establishes that inventories will include the cost of production of services as long as the corresponding income has not yet been recognized according to the provisions of rule 14 relating to income from sales and provision of services.

In short, we do not consider the income in the 705 account but in the 710 account, and we do not do so according to the percentage made but rather by the amount of the expense.

We see it in the previous example.

We remember the data:

A company dedicated to carrying out market studies has been hired to carry out a specific study to be carried out from 01.10.17 to 01.04.18 for an amount of 20,000 euros. (total price of the service)

The costs that will be incurred to carry out the study are estimated at 10,000 euros. Their distribution will be 6,000 in 2017 and 4,000 in 2018.

year 2017

For expenses incurred

For income, at the end of the year we impute the proportion of income that is considered realized. If the 6,000 euros of expenses represent 60% of the total, we can estimate that the income made is also 60%.

Year 2018

For expenses incurred

At the end of the year, we do an imputed calculation for the percentage of income that is judged to have been realized. In this particular scenario, we shall use the remaining forty percent.

for the charge.

• Due to stock adjustments