As you know, the income of any organization is formed from the proceeds from the sale of the product (work, services) and income outside of sales. So, the production of material goods considers its final point to bring the finished product to the consumer (in other words, an implementation act). It is the completion of the last stage of the circulation of production assets, where the commodity value is again converted into money. It would be advisable to consider sales revenue as a separate category.
Indicator content
Revenue from sales (the formula is presented below) is the amount of cash resources received on the account of the company for the sold product (work, services). It is important to note that it is considered an economic category, because it directly shows the relationship of a monetary nature between suppliers and consumers. The considered indicator is the most important source involved in the formation of own financial resources of any organization. In other words, sales revenue is one of the key definitions of the financial and economic life of an economic structure.
Sales revenue (calculation formula shown below) is usually calculated for a specific period of time. In the process of implementing the product (work, services), the indicator in question allows us to determine the final result of the company. It should be noted that in the accountant's report the presentation of revenue is organized subject to tax deduction.
Revenue accounting
In the life of any economic entity, the most important role is played by the fact that revenue is recorded in the form of a sum of money. In addition, this operation is feasible only under certain conditions, among which it is necessary to highlight the following:
- The company has every right to receive funds, which is fixed by the terms of the contract.
- Amount is predetermined.
- The company significantly increases the economic benefit in the event of a transaction or a cash transaction.
- The right fixing the conditions for the disposal of goods (work, services) shall pass to the consumer.
Revenues from the sale of products (the formula is presented below) is determined for periods (for example, a year or a quarter). If the plan is drawn up for a shorter time than presented, then it is called operational.
Additional nuances
It should be noted that the receipt of revenue on time is one of the key tasks of any organization in the market conditions, because this is the main factor determining its position in terms of finance. But its receipt inopportune may lead to unpleasant consequences, including: the delay in the payment of funds to employees of the organization, the occurrence of arrears in the payment of tax and other payments of a mandatory nature, delays in settlements with suppliers and so on.
For tax purposes, revenue from sales (the formula is below) or from the sale of property rights is considered income. It is formed on the basis of revenues that are directly related to payments for the sold product (work, service) or property rights, which can be expressed both in cash and in kind. It depends on the method chosen by the taxpayer (accrual method or cash basis) of the expression of income and expenditure.
More on methods
As mentioned above, the sold product is considered to be shipped (charge method) or paid (cash method) products. It is important to note that before the distinguishing feature of enterprises of the Russian Federation was the use of mainly the cash method, because there were no developed markets (stock and money), from which it would be possible to attract financial resources for insurance against non-payments. Today, the choice of the method for determining the organization's income and expenses is regulated by Chapter 25 of the Tax Code of the Russian Federation, and is also reflected in the accounting policy of the business structure. Revenue from the sale of goods (formula below) is formed as follows:
- As a result of the current (main) activity of the organization. This is the revenue received from buyers and customers for the product sold.
- As a result of investment activity (sale of fixed assets or other assets that are out of circulation, interest and dividends on securities).
- As a result of the financial activities of the enterprise, which is associated with the placement of bonds and shares among investors, repayment of loans and credits granted earlier to other business entities.
Revenue planning
In the process of financial and economic activity, any enterprise carries out revenue planning (the formula “revenue from sales” will be discussed in detail below), which occurs, as a rule, in accordance with three methods. Annual planning is most effective in a stable economic situation, when the supply-demand ratio is known, and tax, credit and other laws remain unchanged. But quarterly and operational planning is applied in the event that control over the timely receipt of funds for the shipped product to the accounts of companies is necessary.
The total revenue from the main type of activity consists of revenue from the sale of a product (work, services) of an industrial or non-industrial nature. When forming this indicator, you need to be aware of the volume of product sold at current prices, excluding VAT, excise taxes, sales or sales discounts, and export tariffs.
Formula. Direct Account Sales
Based on data on the volume of work performed, as well as specific prices and tariffs, revenue can be determined in two ways. The direct invoice method, as its main condition, takes into account guaranteed demand, that is, in this case, the entire volume of the produced product, as it were, falls on an already executed package of orders. The plan for the release of a particular volume of production is pre-correlated with consumer demand. In addition, the assortment, structure of production and associated prices are also well-known indicators. Such a picture implies the use of the following formula in the calculation process:
- B = P * C ( formula: revenue from sales by direct account method).
- In - revenue from the sale of the product (work, services).
- P - the volume of the product.
- C - the price per unit of product.
Naturally, today all the conditions that the direct counting method assumes are practically impossible to fulfill, therefore, as a rule, the second method is used.
Calculation method
This approach is based on adjusting the balances of the sold product (works, services) of an input and output nature. To calculate it is necessary to apply the following algorithm:
- B = O (beginning) + T - O (k) ( formula: revenue from sales by the calculation method).
- In - revenue from sales of products (works, services).
- About (beginning) - the remnants of finished products at the beginning of the planning period, which have not yet been implemented.
- T - goods intended for release in the corresponding period.
- About (k) - the remains of finished products at the end of the planning period, which were not sold.
Sales Analysis and Management Solutions
Why analyze product sales? This allows you to further clarify the decline trends or, much better, the growth in sales that are already outlined. Moreover, the analysis provides information on the implementation of which particular goods it is necessary to make some efforts, and also helps in the development of specific and targeted management decisions regarding the sale of products (works, services). So, for the first stage of the work of this analysis, it is necessary to calculate the growth rate of sales revenue according to the following formula:
- TpN = N1 / N ( sales revenue growth; formula ).
- N1 - revenue from the sale of the product (work, services) in the reporting period.
- N - revenue from the sale of the product (work, services) in the base (previous) period.
This ratio shows how many percent is the turnover of the reporting period in relation to the previous (base).