Revenues - What are revenues?
Revenues are income a company receives in its day-to-day business operations
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Revenues are made largely by the sale of goods and services. There are other ways of acquiring revenue however, such as from interest, dividends, or royalties paid to a business by another company.
Essentially, the revenue of a business is its gross income. The amount includes any discounts or refunds made in the period of time being considered.
Where revenue appears in financial statements
Revenues can be found at the top of the profit and loss statement, above the section of expenses. The reason the profit & loss statement is constructed in such a way is to calculate net income, which is equal to revenues - expenses.
How to Record Revenues
Revenues are increased on the credit side, and are recognised in the financial statements depending on the financial standards the business is using. A business can choose to record their revenues based on one of the two main accounting methods.
In the accrual accounting approach, funds that have been earned, but not received as of the end of the reporting period. Reported as an asset on the balance sheet until cash is received at a later time.
In a cash accounting system, revenues are recorded when the cash actually changes hand, regardless of when the invoice was issued or the due date was listed.
Types of revenues
Technically there are a variety of revenues, classified according to how they were earned in the business. However, revenues can be broken down into two main types:
Any revenue made through normal business operations (the day-to-day sales of products or a service) is considered operating revenue.
Essentially, this includes any revenue made through means other than the daily operations, such as interest earned on investments or money made from selling an asset. Non-operating revenues are considered secondary.
There is an additional type of revenue called deferred revenue. Deferred revenue refers to any payments that are made in advance of a product being delivered or service completed.
Revenues and Debitoor
Accounting and invoicing software is a simple way to stay on top of your income, no matter which accounting method you use. Online solutions allow you to record and track income and expenses from anywhere.
Debitoor also gives you the tools to create financial reports with just a click. Quickly view your profit & loss statement, balance sheet, and VAT report instantly.