Definition Of Revenue In Accounting
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In other words revenue is income earned by the company from its business activities.
Definition of revenue in accounting. Revenue is income that arises in the course of ordinary activities of an entity and is referred to by a variety of different names including sales fees interest dividends and royalties. Revenue is essentially the amount of money a business receives for a specified period. Number of units sold x unit price revenue. Revenue is an increase in assets or decrease in liabilities caused by the provision of services or products to customers.
Revenue is different from earnings which is what s left of your revenue after subtracting the costs of producing or delivering the product or service and any taxes you paid on the amount you took in. Revenue also called a sale is an increase in equity related to the sale of a product or service that earned income. Revenue can also include the discounts and deductions for any returned merchandise during the same period. It is a quantification of the gross activity generated by a business.
This is one of the major differences between accrual basis accounting and cash basis accounting since with cash accounting revenue is recognized when payment is received not when it s earned. Revenue is also known as sales as in the price to sales ratio an alternative to the price to earnings ratio that uses revenue. Revenue is the money you collect for providing a product or service. It is typically calculated as follows.
Hence revenue is the amount earned from customers and clients before subtracting the company s expenses. There are many different types of revenues including product sales consulting fees and other services rent and even. Fees earned from providing services and the amounts of merchandise sold. Often the term income is used instead of revenues.
A company s revenue which is reported on the first line of its income statement is often described as sales or service revenues. Under the accrual basis of accounting revenues are recorded at the time of delivering the service or the merchandise even if cash is not received at the time of delivery. Revenue is money brought into a company by its business activities.
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