Definition
The financial accounting term revenue is used to describe the price charged to customers for good sold, or services rendered. Revenues are reported on a company's income statement.
Calculation
Revenues = Price per Unit x Units Sold
Explanation
When goods or services are sold to a customer, the company is either paid in cash, or an accounts receivable is created. The revenue for a given period of time is equal to the inflow of cash and receivables from sales delivered to customers in that same period of time. Revenues should be adjusted for returns and discounts.
While revenues are frequently cited by companies, analysts and investors often track net income, which takes into consideration costs too. It's possible for a company to generate significant revenue and no profit.
The flow of revenue into a company also creates an increase in owner's equity, since cash and accounts receivables will increase the total assets of a company.
Related Terms
income statement, net income, accounts receivable, sales returns and allowances, accrued revenue, unearned revenue, revenue from bartering
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