Revenue Assignment Help
What do you mean by revenue?
Revenue is basically the income, which the business earns from its normal business activities which is selling of products or services. The goods and services are sold to the customers at a price which covers the production value as well as gives a profit margin to the business. Revenue is also called ‘sales’ or ‘turnover’. It is not necessary that a company earns its revenues from sale of goods and services. Some companies earn revenues from royalties, fees and interests. The revenues are calculated at the end of the financial period and is compared with the expenses to see if the business is running on a profit or a loss. The net income is derived from the following formula:
Total Revenue – Total Expenses = Net Income or Profit
The revenue is one of the important facets of a business’s future hence it comes at the very top of the Income statement. Although there are many other sources of revenues for the profit orientated organizations, but The NGOs or the non-profit organizations have a different source of income. The annual revenue is written as Gross receipts and includes donations from the companies or individuals, government agencies, income generated with the activities done for the organization’s mission, fundraising activities, etc.
What are the types of revenue?
There are basically two types of revenue:
1. Operating revenues
These are those type of revenues which mainly originates from the main business activities and operations, whether it is selling goods and services or giving interests or raking up fees on something that the company produces.
2. Non- operating revenues
These are those type of revenues which are not the same as the direct source of income but are generated by the side activities which are operated by the business. It includes interest’s generation, rent revenue, royalties and fees that they charge.
What are the different types of revenue account list?
These are some of the different types of revenue accounts that are used in the income statement:
1. Revenue account/Sales account/Fees:
This account is the first hand revenue account which records the main revenue amount. Most of the companies and businesses name their revenue accounts as per their requirements like fees earned, service revenue, etc.
2. Rent revenue:
This is an account which records the main interests part which is earned by the business over the course of the financial period. Some firms or organization have their revenue come in the part of interests, which are generated for providing any services to the customers or even if when they lend any monetary help.
3. Dividend revenue:
It is that type of account in which the company records the dividend, which is earned from the stock of the other companies which are jointly earned by the same business organization. If your business holds stock in another business that pays a dividend, that would be considered non-operating. It is a good source of income for the company.
4. Interest revenue:
This account is used for recording the interest revenues which are earned by the business. If your business holds investments that earn interest, that interest earned is considered non-operating revenue. Debt owned is a good example. The interests are the main source of income for some of the business operations.
5. Sales returns:
Sometimes goods are returned by the customers for some defect or due to some other reason. These are recorded in sales returns account which is a contra sales account. It is basically for the consumer orientation.
6. Sales Discounts:
Sales discount account is made to record all the discounts which are given to the customers on the gross amount.
Some of the important accounting terms associated with Revenue and Income statement are:
- Operating Profit = Net sales – Cost of goods sold
- Net Profit = Operating profit - taxes – interest
- Net profit = Net sales – Cost of goods sold – operating expense – taxes – interest
- Net sales = Gross sales – (Customer Discounts, Returns, Allowances)
- Operating Profit = Gross Profit – Total operating expenses
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