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In accounting, revenue is the total amount of income generated by the sale of
goods and services Goods are items that are usually (but not always) tangible, such as pens, physical books, salt, apples, and hats. Services are activities provided by other people, who include architects, suppliers, contractors, technologists, teachers, doc ...
related to the primary operations of the business. Commercial revenue may also be referred to as sales or as turnover. Some
companies A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared go ...
receive revenue from interest, royalties, or other
fees A fee is the price one pays as remuneration for rights or services. Fees usually allow for overhead (business), overhead, wages, costs, and Profit (accounting), markup. Traditionally, professionals in the United Kingdom (and previously the Repu ...
. This definition is based on IAS 18. "Revenue" may refer to income in general, or it may refer to the amount, in a
monetary unit A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general def ...
, 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 An income statement or profit and loss accountProfessional English in Use - Finance, Cambridge University Press, p. 10 (also referred to as a ''profit and loss statement'' (P&L), ''statement of profit or loss'', ''revenue statement'', ''stateme ...
at the very top. This is to be contrasted with the "bottom line" which denotes net income (gross revenues minus total expenses). 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 Tax revenue is the income that is collected by governments through taxation. Taxation is the primary source of government revenue. Revenue may be extracted from sources such as individuals, public enterprises, trade, royalties on natural resour ...
is income that a government receives from taxpayers. Fundraising revenue is income received by a
charity Charity may refer to: Giving * Charitable organization or charity, a non-profit organization whose primary objectives are philanthropy and social well-being of persons * Charity (practice), the practice of being benevolent, giving and sharing * C ...
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 Publicly traded companies typically are subject to rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on th ...
or the rules established by a government or government agency. Two common accounting methods, cash basis accounting and
accrual basis accounting Accrual (''accumulation'') of something is, in finance, the adding together of interest or different investments over a period of time. Accruals in accounting For example, a company delivers a product to a customer who will pay for it 30 day ...
, 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 Publicly traded companies typically are subject to rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on th ...
or on
International Financial Reporting Standards International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's f ...
. In a
double-entry bookkeeping system Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry to ...
, revenue accounts are general ledger accounts that are summarized periodically under the heading "Revenue" or "Revenues" on an
income statement An income statement or profit and loss accountProfessional English in Use - Finance, Cambridge University Press, p. 10 (also referred to as a ''profit and loss statement'' (P&L), ''statement of profit or loss'', ''revenue statement'', ''stateme ...
. Revenue account-names describe the type of revenue, such as "Repair service revenue", "Rent revenue earned" or "Sales".


Non-profit organizations

For
non-profit organization A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...
s, revenue may be referred to as gross receipts, support, contributions, etc. This operating revenue can include donations from individuals and corporations, support from government agencies, income from activities related to the organization's
mission Mission (from Latin ''missio'' "the act of sending out") may refer to: Organised activities Religion *Christian mission, an organized effort to spread Christianity *Mission (LDS Church), an administrative area of The Church of Jesus Christ of ...
, 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 Sponsoring something (or someone) is the act of supporting an event, activity, person, or organization financially or through the provision of products or services. The individual or group that provides the support, similar to a benefactor, is k ...
,
donations A donation is a gift for charity, humanitarian aid, or to benefit a cause. A donation may take various forms, including money, alms, services, or goods such as clothing, toys, food, or vehicles. A donation may satisfy medical needs such as b ...
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 rental A car rental, hire car or car hire agency is a company that rents automobiles for short periods of time to the public, generally ranging from a few hours to a few weeks. It is often organized with numerous local branches (which allow a user to ...
s and banks receive most of their revenue from fees and interest generated by lending
asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can ...
s to other organizations or individuals. Revenues from a business's primary activities are reported as sales, sales revenue or
net sales In bookkeeping, accounting, and financial accounting, net sales are operating revenues earned by a company for selling its products or rendering its services. Also referred to as revenue, they are reported directly on the income statement as ''Sal ...
. 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. 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.


Accounting terms

:
Net sales In bookkeeping, accounting, and financial accounting, net sales are operating revenues earned by a company for selling its products or rendering its services. Also referred to as revenue, they are reported directly on the income statement as ''Sal ...
= gross sales – (customer discounts, returns, and allowances) : Gross profit =
net sales In bookkeeping, accounting, and financial accounting, net sales are operating revenues earned by a company for selling its products or rendering its services. Also referred to as revenue, they are reported directly on the income statement as ''Sal ...
cost of goods sold Cost of goods sold (COGS) is the carrying value of goods sold during a particular period. Costs are associated with particular goods using one of the several formulas, including specific identification, first-in first-out (FIFO), or average cost. ...
:
Operating profit In accounting and finance, earnings before interest and taxes (EBIT) is a measure of a firm's profit that includes all incomes and expenses (operating and non-operating) except interest expenses and income tax expenses. Operating income and ope ...
= gross profit – total operating expenses :
Net profit In business and accounting, net income (also total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales) is an entity's income minus cost of goods sold, expenses, depreciation and amortization, interest, ...
=
operating profit In accounting and finance, earnings before interest and taxes (EBIT) is a measure of a firm's profit that includes all incomes and expenses (operating and non-operating) except interest expenses and income tax expenses. Operating income and ope ...
– taxes – interest :
Net profit In business and accounting, net income (also total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales) is an entity's income minus cost of goods sold, expenses, depreciation and amortization, interest, ...
=
net sales In bookkeeping, accounting, and financial accounting, net sales are operating revenues earned by a company for selling its products or rendering its services. Also referred to as revenue, they are reported directly on the income statement as ''Sal ...
cost of goods sold Cost of goods sold (COGS) is the carrying value of goods sold during a particular period. Costs are associated with particular goods using one of the several formulas, including specific identification, first-in first-out (FIFO), or average cost. ...
operating expense – taxes – interest : EBIT =
net profit In business and accounting, net income (also total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales) is an entity's income minus cost of goods sold, expenses, depreciation and amortization, interest, ...
+ taxes + interest : EBITDA =
net profit In business and accounting, net income (also total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales) is an entity's income minus cost of goods sold, expenses, depreciation and amortization, interest, ...
+ taxes + interest + depreciation + amortization


Accounting

While the current IFRS conceptual framework 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 includes OtherGainsLosses, GainsLossesOnNetMonetaryPosition and similar items.


Financial statement analysis

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 An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition is a ...
). 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 A financial ratio or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial ...
attached to it: *The most important being
gross margin Gross margin is the difference between revenue and cost of goods sold (COGS), divided by revenue. Gross margin is expressed as a percentage. Generally, it is calculated as the selling price of an item, less the cost of goods sold (e. g. producti ...
and
profit margin Profit margin is a measure of profitability. It is calculated by finding the profit as a percentage of the revenue. \text = = There are 3 types of profit margins: gross profit margin, operating profit margin and net profit margin. * Gross Pro ...
; 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 Gross margin is the difference between revenue and cost of goods sold (COGS), divided by revenue. Gross margin is expressed as a percentage. Generally, it is calculated as the selling price of an item, less the cost of goods sold (e. g. producti ...
is a calculation of revenue less
cost of goods sold Cost of goods sold (COGS) is the carrying value of goods sold during a particular period. Costs are associated with particular goods using one of the several formulas, including specific identification, first-in first-out (FIFO), or average cost. ...
, and is used to determine how well sales cover direct variable costs relating to the production of goods. *Net income/sales, or
profit margin Profit margin is a measure of profitability. It is calculated by finding the profit as a percentage of the revenue. \text = = There are 3 types of profit margins: gross profit margin, operating profit margin and net profit margin. * Gross Pro ...
, is calculated by investors to determine how efficiently a company turns revenues into profits.


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.HM Revenue & Customs (United Kingdom)Office of the Revenue Commissioners (Ireland)
[http://dor.mo.gov/ Missouri Department of Revenue
Louisiana Department of Revenue
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

* List of companies by revenue * Legal tender#Demonetization * Proceeds of crime


References


External links

* {{Authority control