Revenue is the income a business generates from its core operations: selling goods or rendering services. Often called turnover or sales, it is the top line of the income statement, recognised before any expense is taken off.
What it means
Revenue is recognised when it is earned, not necessarily when cash is received - a sale made on credit is revenue today even if the customer pays next month. It excludes amounts collected on behalf of others, such as output VAT, which is a liability to SARS rather than income. A credit records revenue; a debit reverses it.
Where it fits in
Payroll does not create revenue, but revenue is what funds it. The income statement starts with revenue and subtracts costs, including the wage and salary bill, to arrive at profit. Tracking payroll cost against revenue is how a business judges whether its staffing is affordable.
Key rules
- Revenue is income from main operating activities, the income statement's top line.
- Recognised when earned, not when cash is received (accrual basis).
- Excludes output VAT and other amounts collected for third parties.
- Credits increase revenue; debits decrease it.
