Revenue Definition

The amount that a business earns by selling goods or providing services is called revenue.

Explanation

Remuneration for goods sold or services provided is called revenue. It includes both cash received for goods sold and services rendered and accounts receivable for goods sold and services rendered on credit.

Revenues that appear in the trial balance are of the following two kinds:

  1. Direct revenue
  2. Indirect revenue

Direct Revenue

Revenue earned from routine activities of the business, such as the revenue generated from the sale of goods and rendering services to customers, is known as direct revenue. It is credited to the trading account.

Indirect Revenue

Revenues earned through activities other than the routine activities of the business are called indirect revenues. The following items are included in indirect revenues:

  1. Commission Received
  2. Interest Received
  3. Rent Received
  4. Discount Received
  5. Discount from Creditors
  6. Discount on Purchases
  7. Dividend Received
  8. Interest on Drawings
  9. Reserve for Discount on Creditors
  10. Interest Received on Renewal of Bills
  11. Bad Debts Recovered
  12. Provision for Bad Debts (Cr. Balance)
  13. Royalty Received
  14. Apprentice Premium
  15. Miscellaneous Income
  16. Sundry Income

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Frequently Asked Questions

What is revenue?

The amount that a business earns by selling goods or providing services is called revenue.

What is direct revenue?

Revenue earned from routine activities of the business, such as the revenue generated from the sale of goods and rendering services to customers, is known as direct revenue. It is credited to the Trading Account.

What is indirect revenue?

Revenues earned through activities other than the routine activities of the business are called indirect revenues.

How do you calculate the revenue?

Revenue is the money your organization receives from the sale of its products or services. Revenue is calculated by multiplying the number of sales and the price of each sale (revenue = sales x average price of service or sales price).

Why is revenue important?

Revenue is the lifeblood of every business. Revenue can tell you a lot about your business, including what you need to do to increase profits. Increasing your revenue will increase your profits.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

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