What is revenue?
Revenue means the money a business receives from the sale of goods and services to clients and customers. The term also refers to income from royalties and interest. We also use the terms sales and turnover.
In accountancy, revenue is related to a specific period, such as a year, quarter, or month.
We also consider an increase in owner’s equity over a given period, before subtracting expenses, as revenue.
The Financial Times glossary has the following definition of the term:
“Money received during a particular period. In the sense of a company receiving payment for its goods or services, same as sales or turnover.”
In businesses, the following are examples of revenue:
- The sale of goods – as occurs in manufacturing or the retail business.
- Fees for services – as in a hairdresser or law firm.
- Fees and interest income from lending assets – as in car rental companies and banks.
- Growth from investments – e.g., interest-bearing deposit accounts and stocks and shares that were purchased.
For a government, the term refers to the money it collects from taxes. It also collects money from licenses, fees, fines, and the printing of reserve bank currency.
Non-profit organizations such as charities and churches use the term ‘gross receipts.’ For-profit organizations exist to generate profit, unlike non-profit ones.
Gross receipts include money that companies or individuals donated, grants, and other awards from government agencies. It also includes income from activities related to the organization’s mission, fundraising, membership fees, and growth from financial investments including stocks and shares.
Revenue vs. income
There are two main types of income:
- Gross income – this is usually the same as gross revenue.
- Net income (profit) – this is gross income minus business expenses.
Put simply; net income is a company’s profits, i.e., the amount of money the business has left over. Specifically, money left over after paying the costs of doing business.
Raw materials, interest on loans, wages, rent, and utilities, for example, are costs.