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Inaccounting,revenue is the total amount ofincome generated by the sale ofgoods and services related to the primary operations of thebusiness.[1]Commercial revenue may also be referred to assales or asturnover. Somecompanies receive revenue frominterest,royalties, or otherfees.[2] "Revenue" may refer to income in general, or it may refer to the amount, in amonetary unit, earned during a period of time, as in "Last year, company X had revenue of $42 million".Profits ornet income generally imply total revenue minus total expenses in a given period. Inaccounting, revenue is a subsection of the equity section of the balance statement, since it increases equity. It is often referred to as the "top line" due to its position at the very top of theincome statement. 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 acharity from donors etc. to further its social purposes.
In more formal usage, revenue is a calculation or estimation of periodic income based on a particularstandard accounting practice or the rules established by a government or government agency. Two commonaccounting methods,cash basis accounting andaccrual 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 ongenerally accepted accounting principles or onInternational Financial Reporting Standards.
In adouble-entry bookkeeping system, revenue accounts aregeneral ledger accounts that are summarized periodically under the heading "revenue" or "revenues" on anincome statement. Revenue account-names describe the type of revenue, such as "repair service revenue", "rent revenue earned" or "sales".[4]
Fornon-profit organizations, revenue may be referred to asgross receipts,support,contributions, etc.[5] This operating revenue can includedonations from individuals and corporations, support from government agencies, income from activities related to the organization'smission, 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 byfund (along with other accounts).
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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 ofsponsorships,donations or outsourcing the association'sdigital media outlets.
Business revenue is money income from activities that are ordinary for a particular corporation, company, partnership, or sole-proprietorship. For some businesses, such asmanufacturing orgrocery, most revenue is from the sale of goods. Service businesses such aslaw firms andbarber shops receive most of their revenue from rendering services. Lending businesses such ascar rentals andbanks receive most of their revenue from fees and interest generated by lendingassets to other organizations or individuals.
Revenues from a business's primary activities are reported assales,sales revenue ornet sales.[2] This includes product returns and discounts for early payment ofinvoices. Most businesses also have revenue that is incidental to the business's primary activities, such as interest earned on deposits in ademand account. This is included in revenue but not included in net sales.[6] Sales revenue does not includesales 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 itsrevenue model.
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While the current IFRS conceptual framework[7] 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[8] includes OtherGainsLosses, GainsLossesOnNetMonetaryPosition and similar items.
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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 standardearnings 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 theshare price.
Revenue is used as an indication of earnings quality. There are severalfinancial ratios attached to it:
Government revenue includes all amounts of money (i.e., taxes and fees) received from sources outside the government entity. Large governments usually have anagency ordepartment responsible for collecting government revenue from companies and individuals.[9]
Government revenue may also includereserve 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.
The dictionary definition ofrevenue at Wiktionary| National | |
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