Goods and services: what is the difference?

In one day Sardor paid money in two places. First he bought a new shirt in a shop and took it home in a bag. Then he had his hair cut at a barbershop and came home carrying nothing. In both cases he paid money. But what did he buy the second time?

What are goods?

Goods are things made for sale that you can hold, see and take home. A shirt, bread, a phone, a bag of potatoes: all of these are goods.

You can buy goods today and use them tomorrow. You can also give them to someone else or sell them again.

What is a service?

A service is work that someone does for you. A barber cuts hair, a taxi driver takes you to an address, a teacher gives a lesson. You get the result of the work, but you cannot put it in a bag.

A special feature of a service: it is often done with you, right there on the spot. A barber cannot cut your hair in advance and put it on a shelf.

Why should we know this difference?

Before you buy goods, you see them, touch them and choose. A service cannot be seen in advance: you only know how the barber will cut your hair when the work is done. That is why people often choose a good craftsman or taxi driver on the advice of people they know.

One more difference: goods wait on the shelf, but a service does not wait. A shopkeeper sells today's unsold shirt tomorrow. But a barber cannot get back tomorrow the hour he sat idle today.

How do we tell them apart?

Ask yourself one question: "Can I hold this in my hand and take it home?" If yes, it is usually goods. If no, it is usually a service.

What if they are mixed?

Sometimes one payment includes both. You go into a cafe and order plov. The plov itself is like goods: you eat it. But cooking it, bringing it to the table and clearing the dishes are a service.

Another example: a craftsman brought you an air conditioner and fixed it to the wall. The air conditioner is goods, and fitting it is a service. On the receipt they are often written as two separate lines.

A note on accounting

In everyday life we call anything that is sold "goods". In accounting this word has a narrower meaning: things bought to be sold again (or rented out). For example, a baker calls the bread he bakes himself "finished goods", but the milk he buys wholesale to sell in his shop he calls "goods". You can read about this difference on the "Goods" page of our glossary.

In the next lesson

In the fifth Basics lesson we will see where money comes from and where it goes: income and expenses, shown on a family and a shop.