Additional Resources

  1. Revenue, Cost And Profit [oswego.edu]
  2. Marginal Revenue Product [courses.byui.edu]
  3. Pure Competition In The Long Run [courses.byui.edu]
  4. 4.4 Classic Example In Economics, (revenue And Costs) [www-stat.wharton.upenn.edu]
  5. 1 Economic Application Of Derivatives [colorado.edu]
  6. The Ohio State University Department Of Economics Econ 501.02 ... [econ.ohio-state.edu]

Revenue

Every type of business will essentially require revenue. It is a type of income earned when sale of goods and services takes place. When revenue is earned without eliminating the costs and expenses (overheads, wages, sundry expenses, etc) then it is termed as Gross Revenue. On the other hand, the money that is left at the end of the day after subtracting the expenses and costs is called the Net Revenue.

Revenue, however, is not the same as profit. If your expenses and costs to bring in revenue surpass the income from the sales of good and service, then you have clearly lost money.

Different types of revenues:

There are two basic types of revenues:

  1. Non operating revenue: This is earned from 'side activity' such as interest revenue.
  2. Operating revenues: These are derived from the core business operations, such as sales of goods and services.

How to calculate revenue:

To compute revenue, the basic formula below is used:

Revenue = Quantity X Price

The amount of revenue is determined using two things: first, the total number of items sold and, second, the selling price of each item.

For example; Company ABC sold 2000 boxes of chocolate, at $30 per box, then: 2000 X $30 = $60000

Revenue accounts:

  • Sales/fees: These take into account the main revenue amounts, such as fees earned.
  • Interest revenue: This account records all the interest that is earned through the business activity.
  • Rent revenue: These take into account all the revenue from the property or equipment of the operating business that is on rent.
  • Dividend revenue: It accounts for all the dividend accumulated on the stock owned by the business.

Revenues are fundamental when evaluating accounting or financial ratios, such as the GMP (gross margin percentage). When a company receives revenue, it is usually listed on the income statement's first line, and is termed as revenue, sales, net revenue or net sales. Under governments, the revenue is the money that is availed through taxes, fines, government grants or subsidies, bonds and other securities, or any sales made. More so, for nonprofit organizations, revenue is termed as 'gross receipts' that basically includes the donations collected from companies, individuals or governments, fundraising activities, investments and membership fees.

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