In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business.[1] Commercial revenue may also be referred to as sales or as turnover. Some companies receive revenue from interest, royalties, or other fees.[2] "Revenue" may refer to income in general, or it may refer to the amount, in a monetary unit, earned during a period of time, as in "Last year, Company X had revenue of $42 million". Profits or net income generally imply total revenue minus total expenses in a given period. In accounting, in the balance statement, revenue is a subsection of the Equity section and revenue increases equity, it is often referred to as the "top line" due to its position on the income statement at the very top. This is to be contrasted with the "bottom line" which denotes net income (gross revenues minus total expenses).[3]
In general usage, revenue is the total amount of income by the sale of goods or services related to the company's operations. Sales revenue is income received from selling goods or services over a period of time. Tax revenue is income that a government receives from taxpayers. Fundraising revenue is income received by a charity from donors etc. to further its social purposes.
In a double-entry bookkeeping system, revenue accounts are general ledger accounts that are summarized periodically under the heading "Revenue" or "Revenues" on an income statement. Revenue account-names describe the type of revenue, such as "repair service revenue", "rent revenue earned" or "sales".[4]
For non-profit organizations, revenue may be referred to as gross receipts, support, contributions, etc.[5] This operating revenue can include donations from individuals and corporations, support from government agencies, income from activities related to the organization's mission, income from fundraising activities, and membership dues. Revenue (income and gains) from investments may be categorized as "operating" or "non-operating"—but for many non-profits must (simultaneously) be categorized by fund (along with other accounts).
Association dues revenue
For non-profits with substantial revenue from the dues of their voluntary members: non-dues revenue is revenue generated through means besides association membership fees. This revenue can be found through means of sponsorships, donations or outsourcing the association's digital media outlets.
Business revenue
Business revenue is money income from activities that are ordinary for a particular corporation, company, partnership, or sole-proprietorship. For some businesses, such as manufacturing or grocery, most revenue is from the sale of goods. Service businesses such as law firms and barber shops receive most of their revenue from rendering services. Lending businesses such as car rentals and banks receive most of their revenue from fees and interest generated by lending assets to other organizations or individuals.
Revenues from a business's primary activities are reported as sales, sales revenue or net sales.[2] This includes product returns and discounts for early payment of invoices. Most businesses also have revenue that is incidental to the business's primary activities, such as interest earned on deposits in a demand account. This is included in revenue but not included in net sales.[6] Sales revenue does not include sales tax collected by the business.
Other revenue (a.k.a. non-operating revenue) is revenue from peripheral (non-core) operations. For example, a company that manufactures and sells automobiles would record the revenue from the sale of an automobile as "regular" revenue. If that same company also rented a portion of one of its buildings, it would record that revenue as “other revenue” and disclose it separately on its income statement to show that it is from something other than its core operations. The combination of all the revenue-generating systems of a business is called its revenue model.[7]
While the current IFRS conceptual framework [8] no longer draws a distinction between revenue and gains, it continues to be drawn at the standard and reporting levels. For example, IFRS 9.5.7.1 states: "A gain or loss on a financial asset or financial liability that is measured at fair value shall be recognised in profit or loss ..." while the IASB defined IFRS XBRL taxonomy [9] includes OtherGainsLosses, GainsLossesOnNetMonetaryPosition and similar items.
Revenue is a crucial part of financial statement analysis. The company's performance is measured to the extent to which its asset inflows (revenues) compare with its asset outflows (expenses). Net income is the result of this equation, but revenue typically enjoys equal attention during a standard earnings call. If a company displays solid “top-line growth”, analysts could view the period's performance as positive even if earnings growth, or “bottom-line growth” is stagnant. Conversely, high net income growth would be tainted if a company failed to produce significant revenue growth. Consistent revenue growth, if accompanied by net income growth, contributes to the value of an enterprise and therefore the share price.
Revenue is used as an indication of earnings quality. There are several financial ratios attached to it:
Price / Sales is sometimes used as a substitute for a Price to earnings ratio when earnings are negative and the P/E is meaningless. Though a company may have negative earnings, it almost always has positive revenue.
Gross Margin is a calculation of revenue less the cost of goods sold, and is used to determine how well sales cover direct variable costs relating to the production of goods.
Net income/sales, or profit margin, is calculated by investors to determine how efficiently a company turns revenues into profits.
Government revenue includes all amounts of money (i.e., taxes and fees) received from sources outside the government entity. Large governments usually have an agency or department responsible for collecting government revenue from companies and individuals.[10]
Government revenue may also include reserve bankcurrency which is printed. This is recorded as an advance to the retail bank together with a corresponding currency in circulation expense entry, that is, the income derived from the Official Cash rate payable by the retail banks for instruments such as 90-day bills. There is a question as to whether using generic business-based accounting standards can give a fair and accurate picture of government accounts, in that with a monetary policy statement to the reserve bank directing a positive inflation rate, the expense provision for the return of currency to the reserve bank is largely symbolic, such that to totally cancel the currency in circulation provision, all currency would have to be returned to the reserve bank and canceled.
^ Wolk, Harry I.; Dodd, James L.; Rozycki, John J. (2008). Wolk, Harry I. (ed.). Accounting Theory: Conceptual Issues in a Political and Economic Environment, Volume 2. Sage library in accounting and finance (7 ed.). Los Angeles: Sage. p. 383. ISBN9781412953450. Retrieved 16 November 2020.
^ abJoseph V. Carcello (2008). Financial & Managerial Accounting. McGraw-Hill Irwin. p. 199. ISBN978-0-07-299650-0. This definition is based on IAS 18.
^HM Revenue & Customs (United Kingdom) Office of the Revenue Commissioners (Ireland) Internal Revenue Service bureau, Department of the Treasury (United States) Missouri Department of Revenue Louisiana Department of Revenue 2017-06-05 at the Wayback Machine
External links
The dictionary definition of revenue at Wiktionary
January 10, 2023
revenue, other, uses, disambiguation, accounting, revenue, total, amount, income, generated, sale, goods, services, related, primary, operations, business, commercial, revenue, also, referred, sales, turnover, some, companies, receive, revenue, from, interest,. For other uses see Revenue disambiguation In accounting revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business 1 Commercial revenue may also be referred to as sales or as turnover Some companies receive revenue from interest royalties or other fees 2 Revenue may refer to income in general or it may refer to the amount in a monetary unit earned during a period of time as in Last year Company X had revenue of 42 million Profits or net income generally imply total revenue minus total expenses in a given period In accounting in the balance statement revenue is a subsection of the Equity section and revenue increases equity it is often referred to as the top line due to its position on the income statement at the very top This is to be contrasted with the bottom line which denotes net income gross revenues minus total expenses 3 In general usage revenue is the total amount of income by the sale of goods or services related to the company s operations Sales revenue is income received from selling goods or services over a period of time Tax revenue is income that a government receives from taxpayers Fundraising revenue is income received by a charity from donors etc to further its social purposes In more formal usage revenue is a calculation or estimation of periodic income based on a particular standard accounting practice or the rules established by a government or government agency Two common accounting methods cash basis accounting and accrual basis accounting do not use the same process for measuring revenue Corporations that offer shares for sale to the public are usually required by law to report revenue based on generally accepted accounting principles or on International Financial Reporting Standards In a double entry bookkeeping system revenue accounts are general ledger accounts that are summarized periodically under the heading Revenue or Revenues on an income statement Revenue account names describe the type of revenue such as repair service revenue rent revenue earned or sales 4 Contents 1 Non profit organizations 1 1 Association dues revenue 2 Business revenue 2 1 Accounting terms 2 2 Accounting 2 3 Financial statement analysis 3 Government revenue 4 See also 5 References 6 External linksNon profit organizations EditFor non profit organizations revenue may be referred to as gross receipts support contributions etc 5 This operating revenue can include donations from individuals and corporations support from government agencies income from activities related to the organization s mission income from fundraising activities and membership dues Revenue income and gains from investments may be categorized as operating or non operating but for many non profits must simultaneously be categorized by fund along with other accounts Association dues revenue Edit For non profits with substantial revenue from the dues of their voluntary members non dues revenue is revenue generated through means besides association membership fees This revenue can be found through means of sponsorships donations or outsourcing the association s digital media outlets Business revenue EditBusiness revenue is money income from activities that are ordinary for a particular corporation company partnership or sole proprietorship For some businesses such as manufacturing or grocery most revenue is from the sale of goods Service businesses such as law firms and barber shops receive most of their revenue from rendering services Lending businesses such as car rentals and banks receive most of their revenue from fees and interest generated by lending assets to other organizations or individuals Revenues from a business s primary activities are reported as sales sales revenue or net sales 2 This includes product returns and discounts for early payment of invoices Most businesses also have revenue that is incidental to the business s primary activities such as interest earned on deposits in a demand account This is included in revenue but not included in net sales 6 Sales revenue does not include sales tax collected by the business Other revenue a k a non operating revenue is revenue from peripheral non core operations For example a company that manufactures and sells automobiles would record the revenue from the sale of an automobile as regular revenue If that same company also rented a portion of one of its buildings it would record that revenue as other revenue and disclose it separately on its income statement to show that it is from something other than its core operations The combination of all the revenue generating systems of a business is called its revenue model 7 Accounting terms Edit Net sales gross sales customer discounts returns and allowances Gross profit net sales cost of goods sold Operating profit gross profit total operating expenses Net profit operating profit taxes interest Net profit net sales cost of goods sold operating expense taxes interest EBIT net profit taxes interest EBITDA net profit taxes interest depreciation amortizationAccounting Edit While the current IFRS conceptual framework 8 no longer draws a distinction between revenue and gains it continues to be drawn at the standard and reporting levels For example IFRS 9 5 7 1 states A gain or loss on a financial asset or financial liability that is measured at fair value shall be recognised in profit or loss while the IASB defined IFRS XBRL taxonomy 9 includes OtherGainsLosses GainsLossesOnNetMonetaryPosition and similar items Financial statement analysis Edit Main article Financial statement analysis Further information Revenue management Forecasting Revenue is a crucial part of financial statement analysis The company s performance is measured to the extent to which its asset inflows revenues compare with its asset outflows expenses Net income is the result of this equation but revenue typically enjoys equal attention during a standard earnings call If a company displays solid top line growth analysts could view the period s performance as positive even if earnings growth or bottom line growth is stagnant Conversely high net income growth would be tainted if a company failed to produce significant revenue growth Consistent revenue growth if accompanied by net income growth contributes to the value of an enterprise and therefore the share price Revenue is used as an indication of earnings quality There are several financial ratios attached to it The most important being gross margin and profit margin also companies use revenue to determine bad debt expense using the income statement method Price Sales is sometimes used as a substitute for a Price to earnings ratio when earnings are negative and the P E is meaningless Though a company may have negative earnings it almost always has positive revenue Gross Margin is a calculation of revenue less the cost of goods sold and is used to determine how well sales cover direct variable costs relating to the production of goods Net income sales or profit margin is calculated by investors to determine how efficiently a company turns revenues into profits Government revenue EditMain article Government revenue Government revenue includes all amounts of money i e taxes and fees received from sources outside the government entity Large governments usually have an agency or department responsible for collecting government revenue from companies and individuals 10 Government revenue may also include reserve bank currency which is printed This is recorded as an advance to the retail bank together with a corresponding currency in circulation expense entry that is the income derived from the Official Cash rate payable by the retail banks for instruments such as 90 day bills There is a question as to whether using generic business based accounting standards can give a fair and accurate picture of government accounts in that with a monetary policy statement to the reserve bank directing a positive inflation rate the expense provision for the return of currency to the reserve bank is largely symbolic such that to totally cancel the currency in circulation provision all currency would have to be returned to the reserve bank and canceled See also EditList of companies by revenue Legal tender Demonetization Proceeds of crimeReferences Edit Wolk Harry I Dodd James L Rozycki John J 2008 Wolk Harry I ed Accounting Theory Conceptual Issues in a Political and Economic Environment Volume 2 Sage library in accounting and finance 7 ed Los Angeles Sage p 383 ISBN 9781412953450 Retrieved 16 November 2020 a b Joseph V Carcello 2008 Financial amp Managerial Accounting McGraw Hill Irwin p 199 ISBN 978 0 07 299650 0 This definition is based on IAS 18 Williams p 51 incomplete short citation Williams p 196 incomplete short citation 2006 Instructions for Form 990 and Form 990 EZ Archived 2009 08 25 at the Wayback Machine U S Department of the Treasury p 22 Williams p 647 incomplete short citation Revenue models Dr K M Popp Archived from the original on 2014 06 19 Retrieved 2014 07 20 IASB IASB HM Revenue amp Customs United Kingdom Office of the Revenue Commissioners Ireland Internal Revenue Service bureau Department of the Treasury United States Missouri Department of Revenue Louisiana Department of Revenue Archived 2017 06 05 at the Wayback MachineExternal links Edit The dictionary definition of revenue at Wiktionary Retrieved from https en wikipedia org w index php title Revenue amp oldid 1131248519, wikipedia, wiki, book, books, library,
