Sales Revenue Definition, Overview, and Examples

Being able to differentiate between the different types of revenue is vital for proper accounting and reporting. The two main components of sales revenue are gross revenue and net revenue.

The resulting gross profit should then be used to cover all operating expenses before any net profit can be calculated. The term is often just referred to as sales or net sales, which means revenues without VAT. Sales turnover is usually expressed in monetary terms but can also be in total units of stock or products sold.

What Does Revenue in Business Mean?

Revenue is the income a company generates before any expenses are subtracted from the calculation. Revenue is often referred to as the “top line” because it appears at the top of the company’s income statement. These two terms are used to report different accumulations of numbers. Revenue may also be referred to as sales and is used in the price-to-sales (P/S) ratio—an alternative to the price-to-earnings (P/E) ratiothat uses revenue in the denominator. Non-operating income is infrequent or nonrecurring income derived from secondary sources (e.g., lawsuit proceeds). Discover the products that 32,000+ customers depend on to fuel their growth. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice.

To find the gross profit, deduct the cost of goods sold from the sales revenue. If your business deals in products, you have to factor in the cost of sales next. Below sales on the income statement comes the entry for the cost of goods sold. If, say, you made that $130,000 in sales revenue by selling $75,000 worth of inventory, that leaves you a gross profit of $55,000. The cost-of-sales accounting formula saves you from having to add up the individual cost of each item sold. 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 figure from which costs are subtracted to determine net income.

Sales Revenue Formula

In this example, sales revenue is everything earned from the sale of the bears. But the company actually earned revenue from activities not related to its core business—the money generated from interest. This is also revenue, but it is non-operating or indirect revenue. In a multi-step income statement, non-operating revenue does not count toward gross revenue. It is recognized after sales revenue, costs of goods sold and operating expenses in calculating the bottom line. In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business.

The company would not recognize the full amount of revenue until the customer has used the program for 12 months. However, revenue growth can be even more important than the revenue number itself. When revenue is growing year-over-year, it implies that the company is expanding by gaining market share, increasing its offerings, or improving its operations. For example, when a company releases its financials for each quarter, the financial media reports whether revenue and earnings per share are above or below expectations. A company’s revenue is an essential component of many financial metrics used to assess whether a company is a good investment. Below is an example of two of the biggest companies listed on the S&P 500 Index. Their market capitalizations are large, and thus, their businesses are equally as vast that they require listing their sources of revenue separately by line item.

Sales Revenue vs. Cash Flow

Any opinions in the examples do not represent the opinion of the Cambridge Dictionary editors or of Cambridge University Press or its licensors. Please note that during March 2018, the mobile sales volume stood at 2,900. Revenues from other sources such as equity affiliates totaled more than $1.5 billion in 2019 and $2 billion in 2018.

• In such cases, a company would record these liabilities as unearned revenue, and revenue would be recognized when goods and/or services are delivered over a period of time.
• Net sales refers to the total amount of sales made by a business after all deductions have been considered.
• Another component of an incremental growth strategy is the rate of revenue growth over a period of time.
• In the case of the federal government, it refers to the total amount of income generated from taxes, which remains unfiltered from any deductions.

Deferred revenue is when a company receives cash payments upfront for products or services sold but has not yet provided the customer with what they paid for. Therefore, the figure for sales turnover in the P&L report represents the total amount of their product or service sold, not the actual amount of money they’ve received. Net sales is an important figure on the income statement and must be accurate, as this amount is used to calculate gross profit on the income statement and can impact a business’s bottom line. Sales revenue is income generated exclusively from the total sales of goods or services by a company. This excludes income generated by any other revenue stream which is not sales. The Management Fee shall be paid promptly at the end of each calendar quarter and shall be calculated on the basis of the “Gross Revenue” of such preceding quarter. Each property manager agrees that its monthly Management Fee shall be subordinate to that month’s principal balance and interest payment on any first lien position mortgage loan on the Property.

If a retailer sells the latest in a new line of sneakers for $100, the gross revenue would be $100. A single-step income statement shows one category for income and one category for expenses. A multi-step income statement shows income and expenses organized under specific expense accounts. In this article, we’ll unpack all you need to know about sales revenue.

Let’s say you find the sum of these three to equal to $5,000—then your net sales would equal $45,000, as the table below illustrates. Being able to differentiate between the different types of revenue is vital for accounting, particularly with respect to net and gross revenue. Total revenue is almost always higher than sales revenue because it is the cumulation of all revenue generating channels of a company. For example, say our music shop allows a local guitar player to use the back room for lessons on Wednesday nights. Whatever this guitar teacher charges for lessons doesn’t count toward the music shop’s sales revenue because it’s not directly related to their core business of selling and repairing instruments. Sales represent the operating revenue, whereas revenue refers to total revenue of the business which includes both operating and non-operating revenue. Revenue from sales is important because without sales, you have no business.

Government Sales

Operating income is a company’s profit after deducting operating expenses such as wages, depreciation, and cost of goods sold. In the case of government, revenue is sales revenue the money received from taxation, fees, fines, inter-governmental grants or transfers, securities sales, mineral or resource rights, as well as any sales made.

• Net income – This is income that is left after the cost of goods sold, and all operating, and non-operating expenses are deducted from the total revenue.
• Government organizations do not typically make money from the sale of services or products.
• Revenue is the money earned by a company obtained primarily from the sale of its products or services to customers.
• Therefore, the net revenue formula should be calculated for each product or service, then added together to get a company’s total revenue.