What is revenue in accounting?
Revenue is the total income a business earns from its core operating activities — primarily the sale of goods or services — before any expenses or costs are deducted. It is recorded at the top of the profit and loss (P&L) statement and is often referred to as the “top line” of a business’s financial performance.
Revenue is not the same as profit. Profit is what remains after all costs and expenses have been subtracted from revenue. A business can generate high revenue but still record a loss if its costs exceed its income.
Types of revenue
Revenue generally falls into two categories:
- Operating revenue: Income earned directly from a business’s primary activities, such as product sales or service fees
- Non-operating revenue: Income from secondary sources, such as interest earned on savings, rental income, or proceeds from the sale of business assets
In Australia, the recognition of revenue in financial statements is governed by the Australian Accounting Standard AASB 15 — Revenue from Contracts with Customers. This standard requires revenue to be recognised when it is earned, not necessarily when cash is received.
Why revenue matters for your business
Revenue is a critical indicator of a business’s scale and commercial activity. It is used to calculate gross profit (revenue minus COGS), operating profit, and net profit, as well as key performance metrics such as profit margins and return on investment.
For GST-registered businesses in Australia, revenue figures reported on the P&L should be shown exclusive of GST, as GST is collected on behalf of the ATO and is not considered income to the business. Accurate revenue tracking is also essential for meeting ATO reporting obligations.