Definition of Revenues
Revenues are the amounts that a company earns when selling goods or providing services to its customers.
Under the accrual basis of accounting, revenues are reported on the income statement in the period when the revenues are earned (not the period when the cash is received). This means that revenues can occur before the cash is received, after the cash is received, or at the same time that the cash is received. Hence, revenues are different from cash receipts.
Revenues are often categorized as:
- Operating revenues, which pertain to a company's main activities
- Nonoperating revenues, which pertain to a company's incidental activities
Examples of Revenues
The following are examples of operating revenues earned by three businesses:
- A retailer's sales of merchandise, sales of extended warranties, and repair revenues
- A law firm's fees that have been earned by providing legal services to its clients
- The interest a bank earns on loans to borrowers
The retailer and the law firm will have nonoperating revenues or nonoperating income when it earns interest by making temporary investments during the months when it has idle cash.