Meaning of revenue

Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of the enterprise.

The term revenue can apply to:

1. the supply of goods
2. the provision of services
3. rent from the hire of equipment or property
4. interest or dividends received on a trade investment.

Revenue from the sale of goods can be recognised when conditions have been met relating to:

1. transfer of significant risks and rewards of ownership
2. seller’s giving up of managerial involvement or control over the goods
3. the amount of revenue
4. economic benefits from the transaction
5. the costs incurred.

Revenue from services ma be recognised only when certain conditions have been met relating to:

1. the amount of revenue
2. economic benefits associated with the transaction
3. the stage of completion of the transaction at the balance sheet date
4. the costs incurred.

Revenue from interest, royalties and dividends may be recognised when it is probable that the benefits of the transaction will flow to the enterprise, and the amount of the revenue can be measured reliably.

1. interest should be recognised on a time proportion basis that takes into account the effective yield on the asset
2. royalties should be recognised on the accrual basis in accordance with the substance of the relevant agreement
3. dividends should be recognised when the shareholder’s right to receive payment is established.

Related posts:

1. Revenue disclosure
2. Accrual revenue
3. Measurement of revenue
4. Contingent liability
5. Disclosures relating to share capital