What Are the Types of Revenue in Business?

What are the different kinds of revenue?

In order to keep business operations going effectively, you need incoming funds. You must keep records of all sales and income from other sources. Find out how to enter the various forms of income into each of the different accounts. You can maintain current, well-organized, and compliant accounting records in this manner.

If you find that your company’s revenue is missing and suspect foul play, please contact our business litigation attorney in Los Angeles for a free consultation.

What does revenue mean?

The money your company makes from conducting business is known as revenue, or sales. Sales account for the majority of a business’s revenue.

The first line of your company’s income statement is where you may locate your revenue. Multiply the cost of the goods or services by the quantity sold to determine sales. You might offer 100 cakes for $5.99 per item, for example. $599 would be your cake sales. This is calculated by multiplying $5.99 by 100.

The accounting system you choose will determine when you enter revenue in your books. When using accrual accounting, revenue is recorded at the time of sale rather than at the time of payment receipt. Only record sales as revenue when you receive payment in person if you use cash-based accounting.

Revenue doesn’t accurately depict the amount of money your company makes over a certain time frame. Profit indicates how much money your company makes or loses when costs are subtracted. You must start with your company’s revenue in order to determine your profit. This is also known as net income or loss. Take your total expenses out of your total revenue to determine your profit.

Kinds of income

When it comes to the types of revenue and business, there are two types of income that your company could receive. These are operating and non-operating.

Operating revenue is money you get from the main activities of your company, such as sales. Let’s say you own a gardening company. In this case, your company’s revenue comes from the services it provides. If you own a pastry shop, then your company’s operating revenue is derived from the sale of cakes and muffins.

Nonoperating revenue is any money that comes from a side activity not related to the business. This could include profits from investments and dividend income. This kind of revenue is not as reliable as operating revenue. Sales are made frequently, but side activities like investments are not as consistent. On an income statement, nonoperating revenue follows the operating revenue.

You will need to look at your operating revenue to compare your company’s income overtime. Because nonoperating revenue is inconsistent, operating revenue will give you a better idea of the company’s growth.

Kinds of accounts for revenue

When your company makes money, you will need to record the revenue in your books. In accounting, there are different kinds of income. Revenue accounts come in both operating and nonoperating formats. These accounts include rent revenue, sales, interest revenue, dividend revenue, and contra revenue.

You have to debit one account and credit another in accrual accounting. Prior to entering information in your revenue accounts, you should understand how debits and credits affect accounting. In short, revenues are decreased by debits and increased by credits. When you receive revenue, you need to credit it. That said, when it comes to contra revenue accounts, you need to debit. These are the opposite of revenue accounts.

• Sales: In your Revenues/Sales account, track incoming funds from your primary business activities. This is the account where your operating revenue is listed. Certain businesses may designate their sales accounts in a more precise manner. One sort of account that keeps track of sales from services you provide is called Service Revenue.
• Income from rent: Rent payments are another benefit you could get as a business owner. You must open a Rent Revenue account if you rent out buildings or equipment on the side. This income is not used for operations.Rental payments are frequently made in advance. That’s why there’s an extra step involved in your journal entries. Assume your tenant paid the rent in full ahead of time. Since they are paying before using the building, you would record it as revenue from unearned rent.You can increase your Rent Revenue account and decrease your Unearned Rent Revenue account once you have earned the money.
• Dividend income: You will get dividend payments if your company owns stock in other companies. Because it is not your primary source of income and does not occur on a daily basis, this is another example of non-operating revenue.
• Interest income: Interest income is another type of non-operating revenue. You must open an Interest Revenue account if you have interest-bearing investments. For instance, you might invest capital in a business and receive interest. The interest revenue must be entered into its own journal entry.
• Accounts for contra revenue:Your revenue accounts usually bring in more money for your company. However, accounts for contra income are also possible. 
  Contra revenue accounts take money out of the sales revenue of your company. Therefore, you must credit the appropriate account, such as Accounts Receivables, and debit these accounts.
  
  It’s possible that you have a sales discounts account or a sales return account. Refunded funds to customers are displayed in the Sales Returns account. The discounts you provided to a customer are displayed in the Sales Discounts account. Suppose a consumer sends back a winter coat. It is necessary to credit the accounts receivable account and debit the contra revenue account.