In accounting, revenue is the income that a business has from its
normal business activities, usually from the sale of goods and
services to customers.
Revenue is also referred to as sales or
turnover. Some companies receive revenue from interest, royalties, or
Revenue may refer to business 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 it 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
For non-profit organizations, annual revenue may be referred to as
gross receipts. This revenue includes donations from individuals
and corporations, support from government agencies, income from
activities related to the organization's mission, and income from
fundraising activities, membership dues, and financial securities such
as stocks, bonds or investment funds.
In general usage, revenue is income received by an organization in the
form of cash or cash equivalents. Sales revenue or revenues is income
received from selling goods or services over a period of time. Tax
revenue is income that a government receives from taxpayers.
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 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".
1 Business revenue
Financial statement analysis
2 Government revenue
3 Association non-dues revenue
5 See also
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. 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.
Financial statement analysis
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). 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 stock
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
Gross Margin is a calculation of revenue less 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.
Main 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.
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 cancelled.
Association non-dues revenue
Association 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.
Net sales = gross sales – (customer discounts, returns, and
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
Look up revenue in Wiktionary, the free dictionary.
List of companies by revenue
^ Joseph V. Carcello (2008). Financial & Managerial Accounting.
McGraw-Hill Irwin. p. 199. ISBN 978-0-07-299650-0.
This definition is based on IAS 18.
^ Williams, p.51
^ 2006 Instructions for Form 990 and Form 990-EZ, US Department of the
Treasury, p. 22
^ Williams, p. 196
^ Williams, p. 647
Revenue models". Dr. K.M.Popp.
Revenue & Customs (United Kingdom) Office of the Revenue
Commissioners (Ireland) Internal
Revenue Service bureau, Department of
the Treasury (United States) Missouri Department of
Department of Revenue
Cash flow statement
Cost of goods sold