Using different product and service types

Applies to : Office Accounting Express, Professional
Office Accounting has three generic types of products and services (service, non-stock and stock) as well as kits that combine multiple products and services when sold.

The table below outlines the differences between the different product and service types:

Product or service Type Description Cost taken
Service Usually used for work performed and non-physical goods, such as delivery and insurance. Can be purchased, sold or both. When purchased
Non-stock Used for physical goods not carried in stock. Can be purchased, sold or both. When purchased
Stock (Office Accounting Professional and Premium) Used for physical goods kept in stock purchased for resale. Stock quantity and stock asset value is tracked. When sold (FIFO)
Kit (Office Accounting Professional and Premium) Used to bundle several products and services of any type. Can only be sold. N/A

As seen above there is a major accounting difference between service and non-stock products on one hand and stock products on the other. Because stock products are purchased into stock, they become assets and are thus not a cost to the company until they are sold. Service and non-stock products on the other hand are considered an expense when purchased, as they are not kept as assets.
Services
Services are typically set up work performed (either by a supplier or work performed for customers), but it could also be non-physical services such as delivery or insurance. Services are expensed when they are purchased and have no direct cost associated when sold.
The Service form looks as follows:

Sample Service
When setting up a new service you have to provide the following:
  • Product Name The name of the service.
  • Sales price (if sold) The price at which the service is sold to customers (can be £0).
  • Income account (if sold) The nominal account where the income is recognised when the service is sold
  • VAT code The VAT code that applies when this service is purchased or sold.
  • Purchase price (if purchased) The price at which the service is normally purchased from suppliers (can be £0).
  • Expense account (if purchased) The nominal account that incurs the expense when the service is purchased.
Notice the two checkboxes labelled I sell this product or service and I purchase this product or service. These boxes define if the service is available in sales- and purchase flows.
If you check the Carriage item checkbox, the service will be treated as carriage (delivery charges). Carriage is excluded from early payment discount.
The standard cost is used for profitability purposes.

Non-stock products
Non-stock products are typically used for physical products that are sold or purchased but where the company does not want to track the individual products in stock. These could be products purchased in bulk, but consumed in smaller scale such as piping or wiring. Office Accounting Express users can use non-stock products instead of stock products.
Non-stock products are expensed when they are purchased and have no direct cost associated when sold (similar to services).
The non-stock product form is basically identical to the service form, except for not having the carriage item checkbox:

Sample Non-Stock Product
Stock products (Available in Office Accounting Professional and Premium)
Stock products are physical products that are purchased for resale and kept in stock. Unlike services and non-stock products, the cost of the purchase is not incurred until the product is sold. The stock product is treated as an asset when purchased and appears on the balance sheet, rather than the profit and loss statement until it is sold.
The stock form looks as follows:

Sample Stock Product
When setting up a new stock product you have to provide the following:
  • Product Name The name of the product.
  • Sales price The price for which the product is sold to customers (can be £0).
  • Income account The nominal account where the income is recognised when the stock product is sold.
  • VAT code The VAT code that applies when this product is purchased or sold.
  • Purchase price The price at which the product is normally purchased from suppliers (can be £0).
  • Asset account The nominal account that holds the stock as an asset on the balance sheet when the product is purchased.
  • Cost account The nominal account that bears the Cost of sales, when the stock product is sold.
The Stock information section tells you
  • The product reorder point (when to order new products).
  • The restock level (what the stock should be replenished to)
  • The quantity on hand (in stock).
  • The posted value of the quantity on hand (the As of only indicates when the opening balance for the product was set up).
  • The total quantity on purchase orders and sales orders.
This gives you an overview per product. If you specify a reorder point, the product will appear with a triangle icon on the product and service list and add a reminder to the dashboard when the quantity on hand falls below the reorder point.

Kits (Available in Office Accounting Professional and Premium)
Kits are simply a collection of stock products, services and non-stock products that are grouped together to be sold as a single “package”. Office Accounting does not track the kit as one product in stock, but rather it tracks the individual parts separately.

Sample Kit
The advantages of the kit are speed of entry and the fact that you can offer a combined discount when certain products are sold together.
There are certain things you should know about kits:
  • Kits cannot be purchased, they can only be sold.
  • The kit itself does not have a cost or a VAT code. The cost and VAT for kits are based on their components.
  • Kits are not tracked in stock – rather the individual components of the kit are tracked in stock (if they are stock products).
  • Kits are not assemblies and the parts of the kit can still be sold individually. The effect is, in a sense that the kit does not exist until it is sold.
  • Product reports track both individual products AND kits.
On sales documents such as invoices, the kit appears as a kit with a price and the individual kit components indented underneath:

As you can see the price and discount is given on the kit line, whereas the VAT is set on the individual kit lines.