The total amount of money a business earns from selling goods or services before any expenses are deducted.
What is Revenue?
Revenue—sometimes referred to as sales, gross income, or top-line income—is the total amount of money a business earns from its core operations. It includes all payments received (or earned) from customers in exchange for goods or services before subtracting any costs or expenses. It’s typically the first line on a company’s income statement, which is why it’s often called “top-line” revenue.
For example, if your business sells T-shirts at $30 each and you sell 100 shirts, your revenue is $3,000. It doesn’t matter if you paid $1,000 for the shirts, $500 for ads, and $200 for shipping—those costs are not deducted when calculating revenue. Instead, they’re accounted for later when calculating profit.
There are different types of revenue, depending on how your business operates:
- Operating revenue comes from your main business activities (e.g., product sales, service fees)
- Non-operating revenue may come from things like interest, royalties, or asset sales
For e-commerce or service-based businesses, revenue can be recognized in different ways depending on accounting method:
- Cash basis: revenue is counted when payment is received
- Accrual basis: revenue is counted when the sale is made, even if payment comes later
Tracking revenue is essential for understanding business growth, calculating taxes, and reporting to investors or lenders. Many business metrics, like gross profit, profit margin, and customer lifetime value (LTV), are based on or compared to revenue.
It’s important to note that sales tax collected from customers is not counted as revenue—it’s held temporarily and passed to the government. For example, if you sell an item for $100 and collect $8 in sales tax, your revenue is $100, not $108. The $8 is a liability, not income.
In summary, revenue is the foundation of your financial reporting. It tells you how much your business brings in and is used to assess performance, file taxes, and attract investors.
