Revenue is the total amount of money received by a company for the sale of goods or services before deducting the expenses. In business terms, revenue is recognized as the amount of money that the company actually receives from its activities like, from the sale of products or services to the customers. In the investor terms, revenue weighs less importance than profit or income, which is documented as the amount of money that the business has brought in or earned after the deduction of all the (business) expenses.
As per the accounting standards put forth by the Council of ICAI1, `Revenue' is defined as the "gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends". In an agency relationship, the revenue is the amount of commission and not the gross inflow of cash, receivables or other consideration.
Revenue is calculated by the charges made to customers or clients for supplying goods and rendering services to them and by the charges and rewards arising from the use of resources by customers. It is the income that can be attributed to a chosen fiscal (year) accounting period that affects the balance (surplus) or deficit, ensued from the operations of that period. |
