Definition: Sales revenue is the income that a firm realizes from selling its products or services to the public. Usually, sales are the net sales that the firm achieves minus the cost of returned merchandise.
What Does Sales Revenue Mean?
What is the definition of sales revenue? This is the revenue that a company generates during an accounting period(quarter or year) and reports on its income statement. Usually, based on a firm’s sales, financial analysts can estimate the size of a firm.
Furthermore, revenues can be broken down into gross sales, which is the total sales that the firm achieved in the past accounting period, and net sales revenue, which is the total sales minus the sales returns, discounts, and allowances of the accounting period.
Let’s look at an example.
Example
Rea Capital Advisors is an advisory firm that offers consulting services for institutional and retail customers. In a few weeks, the company will release its annual results, and the firm’s accountant is preparing the income statement. Therefore, he needs to calculate the net sales from all the receipts he has collected for the accounting period.
According to the company’s recorded transactions, the total annual sales are $784,800, and they are realized from the firm’s core services, which include the provision of consulting services for institutional and retail customers, market research, strategic analysis, and private equity services.
The monthly allocation of sales is the following:
Then, the accountant calculates the total annual costs. The cost for providing consulting services to institutional customers is 15.5% and for retail customers is 11.5%, whereas the cost for market research, strategic analysis, and private equity services is 11% for each service. The total annual costs are $96,476.50.
The monthly allocation of costs is the following:
To calculate the sales revenue formula, the accountant subtracts the total costs from the total sales.
Therefore:
Sales = $784,800 – $96,476.50 = $688,323.50
Summary Definition
Define Sales Revenue: Sale revenues means the money a company earns for selling goods and services to its customers.
