Kara wrote in and asked me to further explain the difference between a service business’s financial statements and that of a product business. I’ll provide another example that should make it more understandable. Definitely check out my previous tutorial before reading this. It is available here The Balance Sheet.
Ever since you made all that money with Mark, your employee, you have been fixated on franchising. Many friends want to learn how to caricature and you want to try out cost method accounting (tax benefits)!
You decide to teach your caricature methods to your friends and help them market for a flat fee of $500. You start your new franchise service called Cartoon You.