It is one of the main sources of income for a business and do you know how to record it?
I’m Thomas Harwood and Welcome to The Accounting Student, where we create free and short videos
so that you can learn about accounting.
Today’s video is looking at how to record a revenue.
Revenue can be defined as the monetary value received for the goods or services supplied
by a business to the customers.
If revenue is larger than expenses then a profit is made. However if revenue is less
than expenses then a loss is made.
All the revenues of a business can be recorded into one large revenue account. Although this
would make it easier and quicker to calculate the profit, it is more practical and helpful
to provide T accounts for each type of revenue.
Types of revenue accounts include:
Rent receivable Commission receivable
Bank Interest receivable Other Interest receivable
Royalties receivable and Subscriptions receivable
Businesses have the choice to name each revenue account as they want.
Let’s now have a look at how revenue is treated in the accounts.
The most important thing to remember is that income or revenue, will always be on the credit
side of a T account.
Before we look at how to record a revenue. You should first know what a T account is
and how to open a T account. You can learn about these two things in the links above.
Cash of £350 has been received from B.Finn for this month’s rent.
The money received can be identified as rent receivable and therefore we will name the
account Rent Receivable. This is also identified as revenue and so we would enter the details
on the credit side of the T account.
Let’s assume the transaction took place on the 4th June 2016 which can be shown as
4/6/16. Then we will note it as cash in the detail column because that is the name of
the other account that has been affected during the transaction. And finally 350 is entered
in the £ column.
Then yearly interest of £20 was received from the business’s bank.
The interest received can be identified as bank interest receivable and therefore we
will name the account Bank Interest Receivable. This is also identified as revenue and so
we would enter the details on the credit side of the T account.
Let’s assume the transaction took place on the 17th June 2016 which can be shown as
17/6/16. Then we will note it as bank in the detail column because that is the name of
the other account that has been affected during the transaction. And finally 20 is entered
in the £ column.
Then at the end of the month, 5% commission was received for selling £1,000 of a particular
good.
First, we need to workout the actual amount received which is £1,000 x 5% = £50.
The money received can be identified as commission receivable and therefore we will name the
account Commission Receivable. This is also identified as revenue and so we would enter
the details on the credit side of the T account.
Let’s assume the transaction took place on the 29th June 2016 which can be shown as
29/6/16. Then we will note it as bank in the detail column because that is the name of
the other account that has been affected during the transaction. And finally 50 is entered
in the £ column.
So that was demonstrating how to record a revenue. If you enjoyed it, press the like
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