What is revenue? The most accurate revenue calculation formula

What is revenue? is always a question many businesses ask when doing business in the market. In the article below, Viindoo It will help businesses have a more holistic view of revenue when doing business in the market. Let's find out now!

1. What is revenue?

Revenue (revenue) is all the money a business receives from the provision of products, services, investments, or other sources of revenue. In the field of economics, revenue is calculated by a formula that is the quantity of a product sold multiplied by the selling price.

What is revenueEnterprise's revenue

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2. Revenue Types and Meaning

There are four common types of revenue:

  • Revenue from sales activities.
  • Revenue from financial activities.
  • Internal revenue.
  • Extraordinary revenue.

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2.1 Revenue from sales activities

Revenue from sales activities is defined as the proceeds from the sale of products and services to customers of the business. Revenue plays a big role for businesses and is an important source of finance to pay for fees incurred in the production and business process.

What is revenueRevenue from sales

Revenues from sales activities include both main and surcharges. This revenue will help businesses not be pressured from external loans. Since then, the pressure on costs in production and business activities has also been significantly reduced.

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2.2 Revenue from financial activities

This is the revenue that the business receives from activities such as dividends, interest, money from securities investment, ...Along with that, this type of revenue also includes items such as profit from the differenceBillion exchange rates, foreign currency trading or other financial activities.

What is revenueFinancial revenue

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2.3 Internal Revenue

Internal revenue is the revenue earned when units within the same company or group buy and sell goods, products or services with each other. This is an important indicator to evaluate the performance of a company's internal business. Internal revenue is only calculated when the transaction is completed, all profits and risks related to the goods have been transferred.

2.4 Extraordinary revenue

This is the revenue a business derives from non-routine activities such as selling supplies, liquidating assets, or cashing in from not having to pay accounts payable.

What is revenueExtraordinary revenue

3. Revenue calculation formula

The following is the formula for calculating revenue from product sales:

Revenue = quantity sold x selling price.

The formula for calculating revenue in service providers:

Revenue = Number of customers using the service x Selling price

A company's revenue is recognized at the time of the transaction. These revenues, whether collected or not, are recognized if they are determined to bring economic value to the enterprise.

Accounting in business It is necessary to distinguish the types of transactions in an economic contract so that revenue can be recognized accurately and appropriately. This requires accounting staff to understand the nature of each transaction to determine how to recognize revenue correctly.

Revenue recognition should be based on the nature of the transaction, not just its form or name. The revenue in the enterprise must also be properly allocated according to the obligations in the purchase and sale of goods and services.

Where a sale of goods creates an obligation for the seller now and in the future, revenue must also be recognized when that obligation is performed. At the same time, revenue also needs to be allocated exactly according to the value of each activity.

4. What is the difference between net sales, net sales and sales?

Here are some differences between the types of revenue in the business:

Net RevenueNet RevenueRevenue
Is the remaining profit after deducting expenses, taxes, ...This is the actual revenue received by the business after deducting taxeslike export tax, excise tax, profit earned but refunded, discounteddiscount or discount on sale.It is the total amount of money a business receives from transactions of buying and selling goods and services as well as other activities. This is the basis for businesses to generate quarterly revenue reports.
Calculation formulaNet revenue = Total revenue - tax, production and business expenses, debt repayment.Net revenue = total revenue – (indirect tax + discount + sales discount + returned goods)Revenue can be calculated in 2 ways:
Method 1:
Revenue = quantity of products sold/services provided * Price of products/services
Method 2:
Revenue = number of customers buying products/services * Average selling price of products/services

Through the above article,  Viindoo helped your business answer the question What is revenue? in detail. Hopefully the above information will help your business have a better overview of revenue. Follow us to learn more important concepts important different in business!

What is revenue? The most accurate revenue calculation formula
SEODO 24 March, 2023

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