Revenue refers to the income that a company has generated from its normal business operations. Its amount will appear in the top line of a company’s profit and loss statement, and to determine the net income (Also see Can You Differentiate Net Income and Net Sales?) that the business has earned, business owners should subtract costs from that figure.
As its name suggests, revenue accounts refer to the accounts that serve to report the income of a business. Such accounts will usually have credit balances. A company may obtain income from various sources, and business owners should hire an accounting firm in Johor Bahru if they find it challenging to record different sources of income in the correct revenue accounts.
Some of the sources that the business can earn income from, which include the sales that it has made, professional fees, rental from the renting activities, dividend received from investments, as well as interests. As a company can earn revenue from both operating activities and non-operating activities, these incomes should be recorded in separate accounts.
The sales account may be the account that records the most transactions that had taken place in a company. The accountants (Also see How Can Good Accountants Help in Growing Your Business and Reducing Your Expenses?) will record the income earned by the company’s main activities, that is the operating activities in the sales account. The figures in this account are very useful as the accountants may use them as the base amount to calculate various ratios of a company. Some of these ratios include the turnover ratio, net profit ratio, as well as gross profit ratio.
Besides, some companies may have a professional income account. The professional income refers to the income generated by exercising any vocation or profession that requires a certain level of manual or intellectual skill. In the professional income account, the accountants (Also see Is It Better For Your Company to Hire a Professional Accountant or Do It Yourself?) will record the income that a business has earned from the professional activities carried out. These are also the income generated by the company through its primary activities. Hence, they fall under the category of operating activities too.
Another type of revenue account that we are going to discuss here is the rental income account. Note that renting activities can either be an operating activity or a non-operating activity, depending on the nature of the business. For a company that carries out renting activities as its principal business activity, the rental income account will fall under the category of operating income (Also see Why Do We Need the Income Statement?) account. However, if the main object of the business activities that a company carries out is not to rent anything, the rental income account will be the company’s non-operating revenue account.
The other two types of revenue accounts, which are the dividend income account and interest income account would fall under the category of non-operating income accounts in most situations. The dividend income account would record the amount that the company has earned form the dividends obtained from the investments made. On the other hand, the interest income account would include the interests gained by the entity. Some of the examples for interest income include the interest on capital, interests on fixed deposits, and the interests that the company has earned from its saving activities.