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Revenue Homework Help

Revenue refers to the money earned by a company from the normal activities it carries out i.e. sale of goods and services to the consumers. It is often referred to as the Sales or Turnover of the enterprise. For non-benefit associations, yearly income might be alluded to as gross receipts. This income incorporates gifts from people and companies bolster from government offices, salary from exercises identified with the association's main goal, and pay for raising support exercises, enrollment contribution.

Accounting Terms used in relevance to Revenue can be understood as follows:

• Net sales = gross sales – (customer discounts, returns, and allowances)
• 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

There are two types of Revenues. These can be classified as follows:

Business Revenue: Business Revenue refers to the income of the businesses. These revenues are the reasons for the survival of the businesses. The revenue is earned through the selling of goods and services provided by the business. The goods can be sold or the services can be rendered to the third part in the return for some consideration.

Government Revenue: The government revenue refers to the amount of revenue generated by the government. The government generates the revenue from the taxes and penalties it charges from the citizens. This contributes to a major part of the revenue earned by the government. Other than this, the governments earn huge revenue from the outside world through grants and donations. The government also earns through running of government companies. The government companies are owned by the government and it works for the welfare of the society.

Revenues can also be classified as:

Operating revenues: Operating Revenues are those that originate from main business operations. These are earned in the normal activities of the business. It is the operating revenue which gets reflected in the Financial Statements i.e. Balance Sheet or in Profit & Loss Account on the Balance Sheet Date. The revenue is a regular income of the business and not just a one- time income. It includes: Sales of the goods made by the business, services provided, commission earned etc.

Non-operating revenues: Non- Operating revenues are not the revenues from the main activity f the business. These are earned from any subsidiary or additional activity of the business. It is not the core product or core service of the business for which the business has been established. It is an additional income in regard to the income earned through sales of goods and services. Non-operating income can include such items as dividend income, profits and losses from investments, gains or losses incurred due to foreign exchange, asset write-downs and other non-operating revenues and expenses.

How is Revenue important for a business?

Earning revenue is the most important function of the business. It is so because:

• Economic Engine: The revenue acts as an engine for the company. It is the revenue that provides the business with the required funds and the resources to acquire other additional resources to keep running the business without any trouble. If a company cannot earn, it is not viable for the company to stay in the market. In simplest terms, zero or low revenue leads to an unprofitable business and negative financial results.
• Growth: Income is frequently analyzed more intently than benefits while surveying the development of a business. Financial specialists need to see that a business can unendingly produce more deals after some time as the organization is elevated to an extending crowd. Stale organizations may create close term benefit; however, they don't pull in light of a legitimate concern for new financial specialists.
• Credit: If a business is able to earn sufficient revenue, it puts the business in a good position in the society. It helps in earning the business a reputation in the society with the help of which it can expand. The higher the revenue, the easier it will be for the business to seek credit or loan from the organizations. The financial institutions rely greatly on the scale of the business sales and the revenue generated by it to check if the business will be able to pay back the loan amount and interest thereon. Poor revenue and weak attractiveness to lenders make it difficult for a company to fund new projects and business activities. This makes it especially challenging to dig the way out of a tough spot.

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