What are Services Rendered in Accounting?

Services Rendered Definition

In accounting, the term “services rendered” refers to any work or service that has been completed and provided to a client or customer.

 

We can break the term down to further help understanding:

 

  • Services Provided: This is simply when a business provides a service to a client. For example, consulting, repair work or legal advice.

 

  • Rendered: The word “rendered” means that the service has been completed or delivered. Once a service is rendered, the provider can bill the client for the work done.
Services Rendered in Accounting

Why It Matters in Accounting

This concept is important because it determines when revenue can be recognised by a business.

 

Under the accruals concept in accounting, revenue is recorded when it is earned, not necessarily when payment is received.

 

This is where the concept of services rendered comes into play.

 

If a service has been rendered, the business can recognise the revenue from that service in their financial records, even if the payment hasn’t been made yet.

Real World Examples of Services Rendered

Let’s now look at a couple of real world examples to help our understanding of services rendered in the real world:

Example 1: Web Design Industry

A client hires a small web design business to create a website for £1,500.

 

The business builds the website over a period of four days, and then delivers the completed website to the client.

 

At this point, the service (website design) has been rendered.

 

Even if the client hasn’t paid yet, the business can record the £1,500 as revenue in their accounting records because the service has been fully provided.

Example 2: Monthly Subscription Services

A martial arts gym offers monthly memberships, where members pay in advance each month.

 

Here, the gym can only record the revenue after each day of service is rendered.

 

For example, on the first day of the membership, only 1/31 (assuming a 31 day month) of the payment is recognised as revenue.

 

By the end of the month, the entire payment is recorded because all services for that month have been rendered.