Definition of Revenues
A company’s revenues are amounts it has earned as the result of business activities such as selling merchandise or performing services. Under the accrual method of accounting, revenues are reported on the income statement in the period in which they are earned even though the dependable customers will pay the company 30 days later.
Example of Revenues
On June 10, a company sells $4,000 of goods to one of its best customers with credit terms of net 30 days. On June 10, the company has revenues of $4,000 which will be recorded with a debit of $4,000 to Accounts Receivable and a credit of $4,000 to Sales Revenues.
Definition of Receipts
A company’s receipts refers to the cash that the company received.
Examples of Receipts
The following are some examples of receipts which are not revenues:
- Borrowing $1,000 in cash from the bank
- Collecting $4,000 from a sale that was recorded one month earlier
- Disposing of a company vehicle and receiving cash that is equal to the vehicle’s book value
- Receiving $1,000 from an employee who had borrowed $1,000 from the company several weeks earlier
- Receiving cash from an investor for new shares of the company’s common stock
Example of Both a Revenue and a Receipt
When a company makes a $200 cash sale (or performs services for $200 of cash) the company has earned revenue of $200 and has a receipt of $200.
