WHAT is it: Revenue is the money generated from normal business operations, calculated as the average sales price times the number of units sold. It is the top line (or gross income) figure from which costs are subtracted to determine net income. Revenue is also known as sales on the income statement.
HOW it works: For many companies, revenues are generated from the sales of products or services. For this reason, revenue is sometimes known as gross sales.
Revenue can also be earned via other sources. Inventors or entertainers may receive revenue from licensing, patents, or royalties. Real estate investors might earn revenue from rental income.
WHY execute the process: It is necessary to check the cash flow statement to assess how efficiently a company collects money owed. Cash accounting, on the other hand, will only count sales as revenue when payment is received. Cash paid to a company is known as a "receipt." It is possible to have receipts without reve-nue. For example, if the customer paid in advance for a service not yet rendered or undelivered goods, this activity leads to a receipt but not revenue.
BENEFIT/OUTCOME: The primary purpose when monitoring expenditure against income is to ensure that expenditure does not exceed the available income. As when monitoring expenditure against budget, the first problem is how to identify which sources of funds are showing significant surpluses or deficits. The easiest way for departmental administrators to spot significant variances is to regularly review the Financial Summary Report.