All inflows of the business are called Revenue Accounts, according to SFAC 6 as “inflow from delivering or producing goods, rendering services or other activities that constitute the entity’s ongoing major or central operations” (Para. 78). Revenue accounts are the amount of money that a company receives from its operating activities in a given period, mostly from sales of products and/or services to customers. It is not to be confused with the terms “profits” or “net income” which generally means total revenue less total expenses in a given period;
- Profit = Revenue – Cost
- Revenue = Cost + Profit or (Loss)
Revenue is calculated by multiplying the price at which goods or services are sold by the number of units sold.
>> Read Types of Accounts.