Revenues

Definition

Revenues are the income generated from normal business operations and include sales of goods or services. They are recorded on the income statement and are critical for assessing a company's financial performance.

5 Must Know Facts For Your Next Test

1. Revenues are recognized when earned, not necessarily when cash is received.
2. Revenues increase equity through their impact on net income.
3. The revenue recognition principle dictates that revenues should be recognized when they are realized or realizable and earned.
4. Revenues can be categorized into operating revenues (from core business activities) and non-operating revenues (from peripheral activities).
5. Revenue is reported at the top line of the income statement, making it a key indicator of financial health.

Review Questions

• When are revenues recognized according to the revenue recognition principle?
• How do revenues impact a company's equity?
• What is the difference between operating and non-operating revenues?

Related terms

Expenses:

Costs incurred in the process of earning revenue.

Net Income:

The profit remaining after all expenses have been deducted from total revenue.

Income Statement:

A financial statement that shows a company's revenues and expenses over a specific period, culminating in net income or loss.