Definition of "Revenue"
While trying to determine your net income, you might come across the term revenue, sales, or gross income. So what does revenue mean? Through revenue, we understand the income generated within a business from sales of products or services rendered. On the income statement, revenues will appear as sales, and they include deductions for returned merchandise as well as discounts for products or services.
The formula to calculate revenue
Revenue = Price + Units sold
What is the definition of Revenue?
The revenue definition is the money that comes into a company from its business activities. As mentioned above, the term can be referred to as sales or gross income and is used to determine the price-to-sales ratio. It is also necessary for the accounting of the company's financial statement, but the type of accounting dictates how revenue is calculated. While the formula presented above is the basis for determining the revenue, that formula is influenced by the accounting method used.
The accrual method of accounting includes revenue that comes from sales made on credit for goods and services purchased by the customer. The cash flow statement will record the collection of money owed that has been paid through credit. Here we can think of credit cards that lead to transactions ending in a receipt that will later be exchanged into money.
The cash accounting method only takes into account sales as revenue when the payment is received. In this case, if a customer orders a product online and pays in advance, they will receive a receipt. That receipt is not accounted for as a sale until the payment is received, then the sale becomes revenue.
What does revenue mean for real estate?
If you’re a REALTOR® and you’re wondering what is the meaning of revenue, you can take a look at your income statement. On the top line, you’ll see revenue, sales, or gross income. That is the income that your activity generated over that accounting period. From that value, your expenses are subtracted until you get to the bottom line, which is net income. When revenue is larger than expenses, you will get a profit, but if your expenses are larger than your revenue, you will experience loss. In order to increase profit, you will have to increase revenue and/or limit expenses.
Popular Real Estate Terms
City apartment building that is overcrowded, poorly constructed or maintained, and generally part of a slum. In law, a tenement also refers to possessions of an individual that are ...
Cash flow before subtracting income taxes. ...
Obligation taken on by a person who did not obtain it originally, but agrees to honor the terms of the existing obligation as a condition for the transaction. By assuming the loan rather ...
Latin for by itself. A per se matter is one that is alone and not connected to another matter. For example, age, per se, is not a determinant of health. ...
Reduction of part of the balance of property by charging an expense or loss account. The reason for a write-down is that some economic event has occurred indicating that the asset's value ...
The maximum pre-approved amount that an individual or business can borrow without preparing a new credit request. It is a safety buffer in the event funds are needed for unexpected ...
Value of a company's or person's name and reputation, As a result, the business will have a competitive edge, and generate better-than-typical future earnings. ...
Money set aside for a possible loss, such as from a fire. ...
The term ad valorem comes from Latin, and its literal translation is “according to value”, which makes the ad valorem tax definition easy to understand. Defining ad valorem tax ...
Have a question or comment?
We're here to help.