When starting a business, most organizations expect to generate income in a short time from the sale of goods or services offered. It often happens that people involved in the management and distribution Money, do not take into account that a good turnover of goods and services in a short period is necessary to obtain free funds.
What are companies?
For a well-coordinated, income-generating work, the company requires cash investments. Payments for goods, services and used assets can be made both in cash and non-cash. The term "company's cash flow" means the totality of all methods of making a profit: payments for goods, settlements on credit obligations, as well as payments to employees and shareholders.
Occurs with the use of available money.
It is carried out with the help of the turnover of non-cash funds at the request of the recipient from the payer's account for the presentation of a negotiable document.
Types of cash turnover
The company's turnover is a set of processes necessary to increase turnover. For this can be used various methods interactions to pay for goods, services or materials received:
- Monetary settlement turnover (used in the interaction of legal entities and individuals to pay bills for goods received, services with non-commodity obligations).
- Monetary turnover (applicable for the provision of services or goods on credit).
- Monetary and financial turnover (typical for material relations between customer and supplier).
Who can become a participant in the cash flow?
The turnover of a company is the interaction between organizations participating in the turnover. These are the cash flows between legal entities, banking institutions, bank and legal or individuals between individuals.
Most often, such interactions occur by bank transfer between the accounts of the customer and the contractor.
Thus, the cash turnover of the company is the totality of all receipts for the produced and also deductions for the consumed electricity, rent of premises, purchase of raw materials, for settlement with shareholders.
Accounting records the receipts and costs of production for the entire time the company has been operating. Based on this, all the material values of the enterprise can be divided into active and passive assets, which play a significant role in the company's turnover. This is proven by the fact that the younger the company, the less it will have inactive assets.
What are enterprise assets?
They are formed as a result of the work of the company and are divided into:
- Active (money in constant circulation used to purchase raw materials, pay for current payments).
- Inactive (do not carry a material burden and cannot be useful if necessary to improve the financial condition of the company).
If active assets appear through production, sale, receipt of payments on debts, advance payments from the customer, as well as obtaining interest rates on long-term investments, then inactive funds most often already exist on the balance sheet of the company at the beginning of its production activities.
Workers see most of the inactive facilities every day - these are working buildings, equipment, any intellectual property, not used in the production process, but which appear in the course of legal activity (client base, reputation, partnerships, etc.)
What affects cash flow?
The company's turnover is a set of assets and material resources that are in circulation in a certain period. Every organization should monitor the need for working capital, as it plays a significant role in optimizing work and production costs.
The company is gaining momentum and increasing the margin ratio, that is, the amount of net proceeds remaining after payment of all debt obligations, payments. But we can not say that - an accurate indicator of the well-being of the company.
The margin ratio can only show the amount of net profit that the organization can spend on its needs in the current month. Accordingly, a company that increases this indicator with high turnover has a short turnover period for goods (goods-buyer-money), as well as a stock of raw materials that is always in circulation.
Thanks to miscalculations, an experienced economist can accurately say whether the turnover of the company is sufficient and whether the company is liquid. Namely, how fast is the circulation of active funds and materials, and whether the company will be able to repay existing obligations to creditors and stay with net earnings.
We recently conducted a study and found that more than 50% of our clients in small and micro businesses do their own bookkeeping. The advantages are obvious - savings. There may not be any cons if the entrepreneur understands financial and accounting records. Sometimes this is critical.
Here is a real-life case that illustrates well the importance financial literacy entrepreneur. Once, when filling out the balance sheet, the business owner indicated the balance of funds in the account, the cost of goods, the amount of accounts receivable and accounts payable, and in fixed assets he wrote with the words: "Nissan".
Do you think that the entrepreneur's assets and liabilities converged, and what would the tax authority say about this?
Confusion in terms can lead to overpayments or arrears, which threaten tax penalties. Everyone should understand and be able to distinguish the main indicators from each other financial activities: revenue, profit, income, turnover and turnover.
Revenue, income and gross margin
Revenue - the amount of money received from the sale of goods, works, services. It can be determined by the “on shipment” method, that is, at the time of actual shipment of the goods or the provision of services, or it can be by the “cash” method, that is, at the time of receipt of payment. In addition to funds received directly from the sale of goods and services, it may also include income from the sale of valuable assets and other receipts.
In accordance with the accounting regulation, “an organization’s income is recognized as an increase in economic benefits as a result of the receipt of assets (cash, other property) and (or) the repayment of obligations, leading to an increase in the capital of this organization, with the exception of contributions from participants (property owners).”
Revenue is an indicator of financial well-being and the starting point to calculate the profit of the enterprise. It can be zero or positive, but never negative.
The concepts of "revenue" and "turnover" are generally identical. At the same time, “turnover” can often be used to refer to the non-cash turnover of the company, that is, the receipt of funds to the current account for goods, works and services sold.
In any case, both revenue, and income, and turnover are "gross" characteristics that do not take into account the costs (expenses) of the company.
Gross profit is equal to the difference between revenue and expenses (costs) for the main activity (cost of goods or services sold). The financial result, which takes into account expenses in all areas of the company's activities, is called net profit(positive financial results) or net loss (negative).
Company turnover, trade turnover and revenue
Often confusion arises in the concepts of "turnover" and "turnover". We have already found out that the company's turnover is the money that the company has, this term refers to the economy. Turnover is a concept from the field of accounting, it denotes the amount of funds received from the sale of goods or services.
Turnover should be distinguished from revenue - in addition to direct income from trade, it may include other types of income and income from the sale of property. Thus, the revenue can be either greater than the turnover, or equal to it.
In addition, it is important how you calculate revenue - on an accrual basis or on a cash basis. As mentioned earlier, in the first case, income or expenses are taken into account in the period to which they relate, in the second - when they are directly paid. If the sale is made in installments or deferred payment, then, in the case of cash settlement, revenue and turnover may also differ.
- Purpose of the article: reflection of information on accounts payable.
- Line number in the balance sheet: 1520.
- Account number according to the chart of accounts: Credit balance 60, 62, 68, 69, 70, 71, 73, 75, 76.
Accounts payable are the obligations of the enterprise in the form of amounts reflected in the accounting accounts at the end of the reporting period. These may be advances received for which the company has not yet provided services or shipped goods. Or, on the contrary, the company was going to receive services, but did not pay money.
What is a creditor
In addition, accounts payable include:
- debts to suppliers for works, goods, services;
- received advances from buyers and customers;
- overpayment of taxes, insurance premiums, fees;
- unpaid wages to employees;
- obligation to accountable person;
- obligations to other creditors.
Accounts for accounting
For settlements on creditors, the Chart of Accounts approved at the legislative level is used. In accounting, these types of debts are accumulated in the following accounts:
How to write off accounts payable
When writing off overdue debts, non-operating income is used in tax accounting, since, in fact, the company made a profit without returning its debts. Write-off entries:
- Debit 60, 62, 70, 71, 76 Credit 91.1 "Other income" - the creditor for the counterparty was written off.
The creditor can be written off after the expiration of the limitation period, which is determined by Article 196 of the Civil Code of the Russian Federation, over 3 years. The delay is considered the day of violation of the terms of the contract for payment or shipment of goods.
For example, Della LLC entered into an agreement with a contractor to perform repair work in the amount of 1,500,000 rubles. According to the terms of the agreement, the company must pay an advance of 40% of the cost of repairs, pay the balance within 5 working days after signing the certificate of completion.
The company paid an advance in the amount of:
- 1,500,000 * 40% = 600,000 rubles.
The unpaid balance was:
- 1,500,000 - 600,000 = 900,000 rubles.
The certificate of completion was signed on 01/30/2018, which means that the debt must be repaid before 02/07/2018. However, there were not enough funds in the company's bank account, so it paid off only on February 16, 2018. The delay is calculated in calendar days. Payment to the creditor was delayed for 10 days.
Reflection of the creditor in the reporting
Drawing up a report "Balance sheet" at the end of the financial year is the direct responsibility of each organization.
The creditor in Form No. 1 is reflected in the liabilities side of the balance sheet in sections:
- "Short-term liabilities";
- "Long term duties".
How to account for debt
The difference between the sections lies in the assessment of the terms of accounts payable. A firm's debt over 12 months should appear in Long Term Liabilities. Accordingly, if the creditor is less than or equal to 12 months, then it is shown in the "Short-term obligations". The terms of repayment are calculated according to the terms of agreements with creditors, with the exception of calculations:
- With a budget.
- With extrabudgetary funds.
- With staff.
The payment of taxes and insurance premiums is regulated by federal and regional legislation, depending on the type. The accumulation of tax creditors can lead to the arrest of a bank account and the bankruptcy of the company.
With regard to settlements with personnel, the delay wages entails material and criminal liability. It's set federal law No. 272-FZ and the Labor Code.
How to calculate the credit balance
For example, at the end of the year, the subject has debts for settlements with the budget:
It follows from the table that the balance of the organization's debt to the Federal Tax Service is 118,000 rubles. However, remembering that for the purposes of correct reporting it is necessary to show debts in expanded form, the following will be written in line 1520 of the balance sheet:
- 110,000 + 10,000 + 80,000 = 200,000 rubles.
The receivable balance for accounts 68.1 and 68.10 will be shown in the asset balance on line 1230.
In general, the presence of a creditor is beneficial for the organization, if crisis situations are not allowed, as this allows you to dispose of funds for other purposes.
But you need to be aware of the consequences. Failure to pay the obligation indicates a deterioration financial situation in company.
Explanations to the balance sheet, which are approved by the Order of the Ministry of Finance No. 66n, provide for a breakdown of the movement of accounts payable for the year in table 5.3. It can characterize turnovers on debts by types in comparison with the data of the previous year.
Debt analysis financial indicators
The creditor turnover shows the period for which the company can pay off its debts. To calculate the turnover ratio, there is an established formula:
To about \u003d cost of goods sold / average annual creditor.
The high value of this coefficient indicates the speed of settlement of obligations, respectively, the higher it is, the better the situation with monetary assets.
However, a decrease in the coefficient does not always mean a low security with current assets, since an enterprise can pay off a debt obligation according to a schedule agreed with creditors.
The average annual value of accounts payable is calculated as follows:
KZ average annual \u003d (debt at the beginning of the year + debt at the end of the year) / 2.
Also, to assess the turnover, the period of collection of accounts payable is used.
PVPC = (average annual payable / cost of goods sold) * 365.
The overdue debt ratio is also important for assessing financial stability. It characterizes the volume of liabilities for which the maturity date expired more than 3 months ago.
In the balance sheet, the creditor is one of key indicators stability economic activity enterprises, so it is necessary to monitor its dynamics. An uncontrolled increase in debt can lead to a fatal outcome for the company.
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Related reference materials
The company's turnover, also called turnover or gross income, is the amount of funds that the company received after the sale of its product. Not a single accounting report can do without determining the turnover or sales proceeds. Economists call turnover one of the main indicators of a company's success, because it is directly related to the efficiency of the enterprise. Turnover is calculated per year, month or season. In the material we will talk about the varieties of turnover and the features of its calculation.
Varieties of turnover
The company's turnover is not an unambiguous term, since it includes many sub-items. It can be kept in one form or another of monetary calculations, considered for the company as a whole or for a particular area of work. The period for which the data is analyzed also matters. Most often, economists are interested in the annual turnover of the company, the twelve-month distance is considered optimal for assessing the state of affairs in the business structure.
A huge impact on modern accounting and reporting in general is exerted by varieties of annual turnover, made in cash and non-cash form.
Total turnover in cash
It should include all payments in cash, for example, payments by companies financial resources to their employees. In addition to wages, the form includes a listing of scholarships, pensions, cash assistance, subsidies, income from financial systems. Cash is widely used in the purchase and sale of goods and services.
How is cash issued?
The system provides for the transfer of funds from the settlement account of the organization using checks, they indicate the amount and purpose. The total turnover can be calculated even for one day, if the funds received by the cash system of the organization are transferred every day to the bank serving the enterprise. Surely, you have come across situations when organizations leave cash at their cash desks.
Such actions are allowed, but only within the limit set by the bank. This limit is precisely set depending on the turnover and the specifics of the company's work - you should answer the question, how much money should be left in the cash register in order to ensure uninterrupted operation, customer service and users?
Turnover of a business company in non-cash form
The company's turnover is not only cash, these days, it is rather predominantly non-cash payments. Such transfers go directly from one account to another and have a number of advantages over cash payments through cash desks described above. Companies do not need to take additional measures to implement the regulatory function of supervisory government agencies they reduce social costs.
It is known that the improvement of the economic condition of a certain company is understood as the acceleration of the overall turnover, which is achieved mainly through a non-cash form. How should non-cash payments be organized? It is important to fulfill them in a timely manner, to ensure that the non-cash turnover of the company is under the constant control of responsible persons, and to prevent unauthorized movement of funds.
How to calculate the annual turnover of a company?
What does turnover mean, we figured it out, now it's the turn of the answer to the question, how can financial turnover be calculated? this work falls on the analysts-accountants of the enterprise, the amount of credit turnover and accounts is used. It allows you to effectively assess the volume of cash flows in operations, investments and commercial activities.
As mentioned above, the financial turnover of the company is called the totality of cash flows, all monetary transactions both cash and non-cash. However, it is recommended to carry out calculations separately for each model described above, even a primary analysis will make it possible to understand how effective non-cash or cash turnover turned out to be.
It is necessary to know the turnover then, in order to assess the financial changes in the enterprise, it is compared with the indicators recorded at the beginning of the reporting period and analyzed. The movement of money turnover allows you to see the difference between the value cash flow last year and the funds received during the year. Turnover per year is a global parameter, it is used to conduct strategic analytical studies.
How to calculate turnover?
How to calculate turnover?
An important indicator of the activity of an enterprise or firm is its turnover. It is used to calculate the payback and daily rate of movement of funds. Before you learn how to calculate turnovers, you need to determine the main indicators that affect them. Working capital is necessary to ensure the production process, as a result, their value is transferred to finished products.
Any economic activity involves the use of working capital.
These include work in progress, inventories, finished and shipped products, accounts receivable, cash and money on the current account of the enterprise. In the daily activities of the enterprise, they go through several stages of use.
Stages of the movement of working capital
- Monetary. The funds are directed to the purchase of raw materials, components, materials, containers, fuel and other components of production activities.
- Production. Previously created stocks as a result of the production process are transferred to finished products or semi-finished products.
- Commodity. To receive funds, it is implemented finished products or semi-finished products.
Management
It is necessary to determine the period for which the calculation will be carried out (for example, for a month, half a year). Most often, the calculation is carried out for the year.
You will need to collect data on all sales made during the selected period. To do this, the cost of goods sold (P) is summed up.
The value obtained as a result of the calculation of sales (P) must be divided by the amount of costs (Z).
The result obtained allows us to analyze the success economic activity.
The larger it is, the more efficiently the assets are used and the higher the profitability of production. An increase in turnover will increase profits.
To assess how effectively working capital is used, they calculate their turnover. To do this, determine the time required for the full turnover of funds from the acquisition of materials (cash stage) to the sale of products (commodity stage). Comparing the planned and actual turnover, they conclude that it is slowing down or accelerating.
Rational use of working capital helps rationing. It includes the development of reasonable standards and norms for the consumption of materials, raw materials and other means to ensure uninterrupted operation. The simplest normalization method is based on the use of data on working capital for the previous period, in which the necessary amendments are made.
To calculate it, you need to divide the turnover for the period under consideration by the number of months in it. This indicator is usually tax service and future creditors.
How to determine the annual turnover
Advice from an Expert Financial Adviser
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The amount of annual turnover represents the income of the enterprise received from its entrepreneurial activity- the entire amount that was received by him from the sale of products, services or works for reporting year. That is, in other words, the annual turnover is the gross income of the company. Just follow these simple step by step tips and you will be on the right track with your financial issues.
Quick step by step guide
So let's take a look at the steps you need to take.
Step 1
Determine the indicator of annual turnover for the last period at your enterprise. At the same time, if your organization is just starting to develop (you have recently opened your own business), you can take statistics from a similar industry and focus on the example of your own competitors. Next, move on to the next step of the recommendation.
Step - 2
Pay attention to what inflation forecast gives Russian government for the period under review (planned year). This indicator must be indicated when planning the entire State budget of any country. Next, move on to the next step of the recommendation.
Step - 3
Output the correction factor to calculate the annual turnover of the planned year. In this case, if you want to keep the turnover at a certain level, the correction factor will have to be equal to one. But if you expect to increase turnover, you need to understand, due to what indicators this is possible. For example, this may be through the most aggressive promotion, by updating the product range, or by increasing prices. Next, move on to the next step of the recommendation.
Step - 4
Make a plan for the implementation of the necessary activities after determining the above factors with reference to the calculated annual plan. Next, move on to the next step of the recommendation.
Step - 5
Make an adjustment to your result for last year using the inflation rate of the planned year (multiply these values). Next, multiply the resulting amount by the correction factor, i.e.
OFF: annual turnover
by the amount of decrease (increase) in annual turnover. Next, move on to the next step of the recommendation.
Step - 6
Break down the value of annual turnover by months to get the expected amount of sales for each specific month of the company's operation. At the same time, try to take into account the peculiarities of your business activity - do not divide income into equal parts. Next, move on to the next step of the recommendation.
Step - 7
Consider also that any activity of the organization, even in such a short period as one year, has its ups and downs. Track them using data from previous years, and then plan monthly turnovers (revenues) in accordance with market changes.
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Asset classification
The assets of the company include the value of the resources that provide the production process of the enterprise. Assets include:
- Non-current assets (structures, buildings, machinery and equipment, transport, etc.),
- Working capital (cash, debts of debtors, short-term investment of funds, etc.).
Asset accounting is mandatory for most Russian enterprises. All assets are concentrated on the left side of the balance sheet and are divided according to their purpose:
- The first section of the balance sheet is represented by non-current assets (fixed assets and intangible assets), which are accounted for in accordance with the residual value minus depreciation (line 1100 of the balance sheet);
- The second section of the balance sheet is represented by working capital, which are directly involved in the production process (line 1200 of the balance sheet).
The formula for the average annual value of assets on the balance sheet
To calculate the average amount of assets of the enterprise for the year, it is necessary to add the value of assets at the beginning and end of the year. This sum is then divided by 2 or multiplied by 0.5.
The formula for the average annual value of assets on the balance sheet uses accounting data.
AT general view the formula for the average annual value of assets on the balance sheet is as follows:
SA cf = (SAnp + SAkp) / 2
Here CA av is the average annual value of assets,
SANP - the value of assets at the beginning of the period,
SAkp - the value of assets at the end of the period (year).
The formula for the average annual value of assets on the balance sheet allows you to calculate both the assets of the enterprise as a whole, and separately for current and non-current assets. current assets.
Calculation features
The total assets of the enterprise are recorded in line 1600 of the balance sheet, which is compiled by accountants at the end of each year. Using this formula, balance sheet indicators for several years are used, while the indicator for line 1600 is taken from the balance sheet for each year, summed up and subsequently divided by 2.
In the case of settlements on current assets, the formula for the average annual value of assets on the balance sheet will require information from line 1200 of the balance sheet. If it is necessary to calculate non-current assets, then the accountant uses the indicators for line 1100 of the balance sheet.
Increasing the company's turnover | 5 main tools
You need to use indicators in a similar way by finding the average value of assets and comparing balance sheet data for the corresponding years.
The value of the average annual value of assets on the balance sheet
The average annual value of assets, which is calculated by analysts, is used in the future when calculating coefficients that can characterize the state and efficiency of any enterprise:
- return on assets,
- Asset turnover ratio, etc.
Also, the indicator is used in order to find the reasons that led to changes in the operation of the enterprise, and to make decisions in the field of resource management.
Average annual value of assets can give a more accurate understanding of the size and value of assets, while it levels out circumstances that could distort the real amount of assets.
If the indicators of asset turnover of different enterprises for different years are compared, then it is necessary to check the uniformity of the assessment of the average annual amount of assets.
Examples of problem solving
Revenue(also found as turnover and volume of sales) - the total amount of claims (including unpaid ones) presented by an enterprise or entrepreneur to buyers as a result of the sale of manufactured products, services, works for a certain period. Revenue is one of the types of company income. Gross profit equals the difference between revenue and expenses (costs) for the main activity (cost of goods or services sold). Capital gains resulting from an increase for some reason in the value of an enterprise's assets are not revenue. For charities, revenue includes total cost received cash gifts.
Revenue from the sale of products (works, services) includes cash or other property in monetary terms, received or to be received as a result of the sale of goods, finished products, works, services at prices, tariffs in accordance with the agreements. Net revenue, unlike gross revenue, is reduced by the amount of taxes.
At the same time, the activity of the enterprise can be characterized in several directions:
- proceeds from the main activity coming from the sale of products (work performed, services rendered);
- proceeds from investment activities, expressed as a financial result from the sale of non-current assets, the sale of securities;
- proceeds from financial activities.
Total revenue is made up of revenue from these three areas. However, the main value in it is given to the proceeds from the main activity, which determines the whole meaning of the existence of the enterprise.
Counting Features
AT accounting There are two main methods for calculating revenue:
- cash method- revenue is considered to be cash payment received on the accounts or in the cash desk of the enterprise or goods received in payment of obligations (barter).
- accrual method- revenue is accrued when consumers have obligations to pay for the products or services of the enterprise.
How to calculate annual turnover
Most often, accrual occurs at the time of shipment to the consumer of products or services.
see also
Notes
- G.I. Efimov, V.G. Krutsko, K.G. Nakhapetyan, V.A. Perehodchenko. Fundamentals of management in modern conditions. - Moscow: Sputnik +, 2016. - S. 25. - 374 p. - ISBN 978-5-9973-3668-4.
- Enterprise Finance: tutorial/ N. E. Hare; under total ed. N. E. Zayats, T. I. Vasilevskaya. - 3rd ed., Rev. - Minsk: Vysh. school., 2006. - 528 p.
How to calculate turnover?
An important indicator of the activity of an enterprise or firm is its turnover. It is used to calculate the payback and daily rate of movement of funds. Before you learn how to calculate turnovers, you need to determine the main indicators that affect them. Working capital is necessary to ensure the production process, as a result, their value is transferred to finished products.
Any economic activity involves the use of working capital.
What does a turnover of 5 million per day mean? (inside)
These include work in progress, inventories, finished and shipped products, receivables, cash and money in the company's current account. In the daily activities of the enterprise, they go through several stages of use.
Stages of the movement of working capital
- Monetary. The funds are directed to the purchase of raw materials, components, materials, containers, fuel and other components of production activities.
- Production. Previously created stocks as a result of the production process are transferred to finished products or semi-finished products.
- Commodity. To receive funds, finished products or semi-finished products are sold.
Management
It is necessary to determine the period for which the calculation will be carried out (for example, for a month, half a year). Most often, the calculation is carried out for the year.
You will need to collect data on all sales made during the selected period. To do this, the cost of goods sold (P) is summed up.
The value obtained as a result of the calculation of sales (P) must be divided by the amount of costs (Z).
The result obtained allows us to analyze the success of economic activity. The larger it is, the more efficiently the assets are used and the higher the profitability of production. An increase in turnover will increase profits.
To assess how effectively working capital is used, they calculate their turnover. To do this, determine the time required for the full turnover of funds from the acquisition of materials (cash stage) to the sale of products (commodity stage). Comparing the planned and actual turnover, they conclude that it is slowing down or accelerating.
Rational use of working capital helps rationing. It includes the development of reasonable standards and norms for the consumption of materials, raw materials and other means to ensure uninterrupted operation. The simplest method of normalization is based on the use of data on working capital for the past period, which are adjusted as necessary.
Question: How to calculate the turnover on the current account?
Answer: The most commonly used indicator is the average monthly turnover. To calculate it, you need to divide the turnover for the period under consideration by the number of months in it. This indicator is usually of interest to the tax service and future creditors.
Question: What is net account turnover and why are they needed?
Answer: Net turnover is the difference between income (debit) receipts and funds that are not related to the main activity of the company (for example, charity). The indicator is used to analyze financial activity, comparing the results of reports and the actual movement of funds.
Question: What is the standard for working capital?
Answer: It represents the minimum amount in monetary terms, without which production cannot be organized. To calculate it, use the stock rate in days for each element participating in manufacturing process, and the indicator for which this norm is set.
We recently conducted a study and found that more than 50% of our clients in small and micro businesses do their own bookkeeping. The advantages are obvious - savings. There may not be any cons if the entrepreneur understands financial and accounting. Sometimes this is critical.
Here is a real-life case that illustrates well the importance of financial literacy as an entrepreneur. Once, when filling out the balance sheet, the business owner indicated the balance of funds in the account, the cost of goods, the amount of receivables and payables, and in fixed assets wrote the words: “Nissan”.
Do you think that the entrepreneur's assets and liabilities converged, and what would the tax authority say about this?
Confusion in terms can lead to overpayments or arrears, which threaten tax penalties. Everyone should understand well and be able to distinguish from each other the main indicators of financial activity: revenue, profit, income, turnover and turnover.
Revenue, income and gross margin
Revenue- the amount of money received from the sale of goods, works, services. It can be determined by the “on shipment” method, that is, at the time of actual shipment of the goods or the provision of services, or it can be by the “cash” method, that is, at the time of receipt of payment. In addition to funds received directly from the sale of goods and services, it may also include income from the sale of valuable assets and other receipts.
According to the accounting regulations income an organization recognizes an increase in economic benefits as a result of the receipt of assets (cash, other property) and (or) the repayment of liabilities, leading to an increase in the capital of this organization, with the exception of contributions from participants (property owners)”.
Revenue is an indicator of financial well-being and the starting point for calculating the profit of an enterprise. It can be zero or positive, but never negative.
The concepts of "revenue" and "turnover" are generally identical. At the same time, “turnover” can often be used to refer to the non-cash turnover of the company, that is, the receipt of funds to the current account for goods, works and services sold.
In any case, both revenue, and income, and turnover are "gross" characteristics that do not take into account the costs (expenses) of the company.
Gross profit equal to the difference between revenue and expenses (costs) for the main activity (cost of goods or services sold). The financial result, which takes into account expenses in all areas of the company's activities, is called net profit (positive financial result) or net loss (negative).
Company turnover, trade turnover and revenue
Often confusion arises in the concepts of "turnover" and "turnover". We have already found out that turnover companies are the money that an enterprise has, this term refers to the economy. Turnover is a concept from the field of accounting, it denotes the amount of funds received from the sale of goods or services.
Trade turnover should be distinguished from proceeds - in addition to direct income from trade, it may include other types of income and income from the sale of property. Thus, the revenue can be either greater than the turnover, or equal to it.
In addition, it is important whether you calculate revenue on an accrual basis or on a cash basis. As mentioned earlier, in the first case, income or expenses are taken into account in the period to which they relate, in the second - when they are directly paid. If the sale is made in installments or deferred payment, then, in the case of cash settlement, revenue and turnover may also differ.
The difference between profit and turnover
If there is nothing wrong with calling revenue turnover, then it is very important to distinguish profit from turnover, for example, in order not to overpay income tax.
Thus, the concept of "turnover" characterizes how much money the company has in principle, and profit is how much money the company can invest in its own development.
The difference between expense and loss
Expenses are all the money a company spends to produce and sell its product. These include material costs, salaries and other payments to employees, the cost of repairing equipment and premises, rent, taxes.
When expenses exceed the income of the company, there is a loss.
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