Journal entries for recording revenue and costs for service provider. For a traditional inventory-carrying companies, recording journal entries for revenue and costs is something like the following: Dr. Cash  $100    Cr. Revenue  $100 Dr. Cost of goods sold  $50   Cr. Inventory  $50 How does the journal entry work for service companies such as SaaS firms that do not carry inventory?

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A:

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.