Revenue is the amount a company earns for all products sold or services rendered during a specific time period. Sometimes referred to as profit or turnover, it is computed for by subtracting the cost of production from the total earnings or sales.
Revenue is always one of the most important elements in any financial statement. Annual performance for any company is determined by the ratio of its revenues to its expenses. This formula produces the company’s net income.
While it is true that net income tells us what the actual profit is, it is very important for companies to monitor the rate at which revenue grows over the year. This is because it is an essential indicator of various financial ratios. In fact, even though the net profit plateaus, the company’s performance can still be considered good as long as revenue growth remains consistent.
Furthermore, there are different ways of identifying or recognizing when revenue is made. Some companies consider that revenue has been made when they payment for the product or service has been received, while for others, the delivery of product or service is the main indicator. There are also some companies which recognize revenue as early as when the contract is signed. The correct method is determined by the way accounting is handled.
On the other hand, government revenue is commonly considered as money earned through taxation. Other sources for revenue come in the form of government fees, penalties, and licenses, as well as printed currency in the Reserve Bank.