Revenue

Revenue is an increase in assets or decrease in liabilities caused by the provision of services or products to customers. It is a quantification of the gross activity generated by a business.

Under the accrual basis of accounting, revenue is usually recognized when goods are shipped or services delivered to the customer. Under the cash basis of accounting, revenue is usually recognized when cash is received from the customer following its receipt of goods or services. Thus, revenue recognition is delayed under the cash basis of accounting, when compared to the accrual basis of accounting.

The Securities and Exchange Commission imposes more restrictive rules on publicly-held companies regarding when revenue can be recognized, so that revenue may be delayed when collection from customers is uncertain.

There are several deductions that may be taken from revenues, such as sales returns and allowances, which can be used to arrive at the net sales figure. Sales taxes are not included in revenue, since they are collected on behalf of the government by the seller. Instead, sales taxes are recorded as a liability.

Revenue is listed at the top of the income statement. A variety of expenses related to the cost of goods sold and selling, general, and administrative expenses are then subtracted from revenue to arrive at the net profit of a business.

There were many standards governing revenue recognition, which have been consolidated into the GAAP standard relating to contracts with customers.

Similar Terms

Revenue is also known as sales.

Related Courses

Accountants' Guidebook 
Bookkeeping Guidebook 
Revenue Recognition