Business, Legal & Accounting Glossary
the entire amount of income before any deductions are made.
Revenue is the “top line” or “gross income” figure from which costs are subtracted to determine net income. Revenue is calculated by multiplying the price at which goods or services are sold by the number of units or amount sold.
Revenue is referred to as income earned by any firm or nation in exchange for any good or service. Income received in exchange for normal business activity is termed as revenue. Income collected from sales of goods and services, interest, dividends, and profits is all accounted for as revenue.
Revenue of any organization is measured when there is an increase in assets or decrease in liabilities during any accounting period. Increase in assets could be due to an increase in product sales, an increase in services, and an increase in earnings from various shares and debentures. Revenue for government accounting can be measured by receipts from various taxes, customs, and other allotments.
Revenue is a term primarily used in the United States to describe the amount of money a company generates in a set period of time through the sale of products and/or services. Revenue is calculated before any expenses are deducted, with the reporting of revenue varying from business to business. Revenue can be ‘recognized’ or ‘received’ in different ways. Revenue can be legally recognized when products/services are exchanged for cash or other assets, or when a claim to cash or asset is made (such as a signed contract). The rules specifying when the recognition of revenue should occur are based on various accounting methods, including cash basis accounting and accrual basis accounting. Businesses often break revenue down by operating segment, department, geographic location and/or product/service line, among others. In government, revenue is derived from taxes, liens, licenses and other fees. Non-profit organizations broaden revenue classification to include donations, grants and barters. Another name for revenue is “top line” because of its prominent position at the top of an income statement. Often the terms sales and revenue are used interchangeably.
Revenue is also known as “REVs”. Revenues can also be represented by accounts receivable.
According to business activities, revenue can be differentiated into the following types.
AR (Average revenue) = TR (total revenue) / Q
Where Q = total output sold
Net revenue earned by selling an additional unit of product is termed as marginal revenue. If any firm sells n-1 products, then the extra revenue earned by selling n number of products is termed as marginal revenue. Thus,
MR (marginal revenue) = ∆TR / ∆Q
Where ∆TR = change in total revenue for selling an extra unit, ∆Q = change of total output for selling an extra unit
A graphical representation can illustrate the concept of marginal revenue in a better way.
The area under the demand curve is total revenue.
The CEO made his strategic recommendations using the revenue projection from last year, and it didn’t take into account the effect of the new tax laws.
At first glance, this company looks very successful, but their monthly revenue never seems to be more than ten per cent more than their monthly expenses.
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This glossary post was last updated: 29th March, 2020