What is Revenue?

Revenue, turnover and profit

• Revenue — income from normal trading activity, before costs. The top line
• Turnover — in Australia, generally used interchangeably with revenue. GST turnover has a specific meaning for registration thresholds
• Profit — what remains after costs. See gross profit and net income

Revenue says nothing about whether a business makes money. A venue can grow revenue every quarter and lose more each time.

GST-exclusive, because it was never yours

If you are registered for GST, a $1,100 sale that includes GST is $1,000 of revenue and $100 owed to the ATO. The GST is collected on the ATO\u2019s behalf and sits as a liability until the BAS settles it.

Recording the full $1,100 as revenue overstates the top line by roughly nine percent and makes every margin percentage wrong. It is the single most common bookkeeping error in a newly registered business.

When revenue is recognised

Revenue is recognised when it is earned, not when the money arrives. Work completed in June and invoiced on 30 June is June revenue even if paid in August — which is why a profitable month can be a cash-poor one.

Money received before the work is done is not revenue yet. A deposit for a February function taken in December is a liability until the function happens.

Key takeaways

• Revenue is income from trading before costs — the top line
• GST-registered businesses record it GST-exclusive; the GST was never theirs
• Revenue is recognised when earned, not when paid
• Deposits for future work are a liability, not revenue