Items That Make Up The Gross Revenue Of A Company

Gross Revenue is the inflow of money or money’s worth to the firm, e.g. sales figures, rents, discounts received etc. before any costs are deducted. They must be distinguished from proceeds of the sale of fixed assets, which is capital income rather than revenue income and is ultimately shown in the balance sheet rather than the trading, profit and loss account.

Identifying the income of a business is best done by having a look at the Income and Expenditure Statement in detail.

An Income and Expenditure Statement is a report of the money you made and the money that you spent during a period of time – this usually being a period of one year. You can do a statement for a month, a quarter or a year or any time period if necessary.

Click here to view a video that explains the income statement.

Sales are the main source of income for a business. Other income may be rent received, interest received, etc.

Gross Income is the amount of money received BEFORE any deductions.

Income or revenue, therefore, is the opposite of expenses. While expenses are generally money flowing out of the business, income is the money coming into the business.

We have also identified that Sales are the most important source of income for a business.

This is the money that comes in from the sale of goods or services. If a furniture shop for instance sells its goods, this is called sales.

There are other sources of income that we should know about. Look at the following:

Rent Received: A business may not use all the space available and so there could be space that is of no use to you, as a business owner. If the owner of a nearby business offers rent of say, R1500 per month for use of that space, you would of course accept it. This income would then be Rent Received.

Discount Received: A business would need to buy certain items, probably for re-sale and because of quantity or early payment; the business would receive a discount on those items. This is income and is known as Discount Received.

Businesses will quite often invest sums of money in interest-bearing accounts or policies. These amounts will earn interest that is a source of income. This income is called Interest Received.

Most budgets are prepared by looking at the previous year’s activities of a business. This means that to produce an accurate budget; we must correctly estimate the type, amount and timing of income or revenue. We must focus on the sources of income, the amount and the timing of receipts.

This can be done by looking at what happened last year. It may be a good idea to ask the sales department to build up figures based on what customers have done in the past – how much they have purchased etc.