What is revenue?
Revenue, also called sales or turnover, measures a business's commercial activity. It is the starting point for every profit measure, which is why it's called the top line.
Types of revenue
- Operating revenue: sales of goods and services from core activities.
- Non-operating income: interest, rental income, gains on asset sales. These are usually shown separately.
- [Recurring revenue](/glossary/recurring-revenue): predictable subscription or contract income.
Gross vs net revenue
Net revenue = Gross sales − Returns − Discounts − Allowances
Sales taxes such as [VAT](/glossary/value-added-tax-vat) collected on behalf of the government are not revenue.
Revenue vs profit
Revenue is what comes in from sales; profit is what's left after costs. A business with high revenue can still make a loss.
When to record revenue
Under revenue recognition](/glossary/revenue-recognition) rules ([IFRS 15 and ASC 606), revenue is recognised when control of goods or services passes to the customer, not necessarily when cash is received.
Example
A shop sells $120,000 of goods, grants $3,000 of discounts and accepts $2,000 of returns. Net revenue = $115,000.
Key metrics
- Revenue growth rate
- Revenue per customer or per employee
- Revenue by product, region or channel