Revenue meaning in simple words: the top line, explained
Revenue: the money a company earns from selling its goods and services in a period, before taking off any costs.
The story
two people, one chai stall
Year-end. Sameer is grinning at a spreadsheet.
Sameer₹120 crore! We're a ₹120 crore company!
RiyaThat's our revenue: everything customers paid us for chai, buns and office supply this year. Q1 was ₹27 crore, and every quarter grew. Q4 was ₹33 crore.
SameerSo we have ₹120 crore?
RiyaNo. Revenue is the top line, before any costs. Milk, tea, cups, staff, rent, interest, tax: take all that off and we keep ₹9 crore.
SameerOnly 7.5 paise from every rupee?
RiyaThat's the net margin. Revenue tells you how big we are. Profit tells you how good we are at it.
SameerWhere does the ₹120 crore come from?
Riya₹100 crore from the stalls and ₹20 crore from supplying offices and cafés.
SameerAnd the GST customers pay?
RiyaNot ours. We collect it for the government, so it isn't counted in revenue.
SameerStill putting ₹120 crore on my visiting card.
The grown-up version
same idea, exact words
Revenue from operations is income from a company's ordinary business: sale of products, sale of services and other operating revenue. Under Ind AS 115 it is recognised when control of goods or services passes to the customer, at the amount the company expects to be entitled to, net of discounts and excluding amounts collected for others, such as GST. Other income, like interest on deposits, is shown separately, and revenue plus other income is total income.
Formula
Total income = Revenue from operations + Other income
Which rule asks for itInd AS 115, Revenue from Contracts with Customers; Schedule III (Division II), Companies Act, 2013 (presentation of revenue from operations); Section 2(91) defines turnover.
Spot it in the wild
a real annual report, a real page
- Watches, jewellery and eyewear sold: ₹67,372 crore. Jewellery made by Titan alone is ₹52,405 crore.
- Total revenue from operations: ₹77,554 crore, including ₹9,975 crore of gold and other sales.
Don't mix it up
the usual confusions
Revenue ≠ profit
Revenue is everything customers paid for. Profit is what is left after costs. Sameer Chai's ₹120 crore of revenue leaves ₹9 crore of net profit.
Revenue ≠ other income
Other income, like interest on bank deposits, isn't from the main business, so it sits on a separate line below revenue from operations.
Revenue ≠ cash received
Revenue is counted when the chai is delivered, even if the café pays next month. That's why ₹5 crore was still owed by customers on 31 March.
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Hindi mein
रेवेन्यू (आय / बिक्री)
रेवेन्यू वह पैसा है जो कंपनी अपना सामान और सेवाएँ बेचकर कमाती है, कोई भी ख़र्च घटाने से पहले।
Sources
- Companies Act, 2013, India Code