Final answer:
Service companies do not track inventory or cost of goods sold as they have no physical products, focusing instead on costs related to service delivery. Retail and manufacturing companies must account for inventory, cost of goods sold, and production processes due to their dealings with physical products and necessary production management.
Step-by-step explanation:
The major differences between service companies and retail or manufacturing companies in terms of accounting include several key points. First, service companies do not have physical products to account for, which means they do not need to account for inventory or cost of goods sold (COGS). Their primary costs are related to delivering the service, such as labor, marketing, and rent. On the other hand, retail and manufacturing companies do need to manage inventory and calculate the cost of goods sold as they deal with physical products.
Moreover, retail and manufacturing entities often have complex production processes that they need to account for. This includes tracking the costs associated with producing goods, such as raw materials, labor, and overhead. Retail companies like Amazon have taken advantage of economies of scale and harness technology for efficient inventory management in large warehouses, which contrasts with traditional retail businesses that have more costs associated with physical stores and less efficient inventory systems.
To summarize, service companies focus their accounting on the costs of delivering a service without the need to track inventory or COGS, which are essential accounting aspects for retail and manufacturing businesses due to their involvement with physical products and the necessity to manage production processes and related costs.