What is gross revenue?

Definition

Gross revenue is the billed sales figure a shop records before anyone sends goods back, takes a discount, or is given a price concession. On the books, this is the starting revenue credit on the Income Statement, taken from the invoice amount.

A furniture store that invoices a $2,400 sofa has billed $2,400 that day. A later return or early-pay cut lives on a different line.

Cash-basis books may wait until cash arrives to show any sale. Accrual books record the billed amount when the sale is earned, and they hold the unpaid piece in accounts receivable.

This figure is billed sales. It is not a bank deposit, and it is not the net number the P&L will keep after contras.

Where it shows up

Balance Sheet: Related to billed sales that may still sit in receivables.

P&L: Located at the top of the Income Statement, before returns and discounts.

Cash flow: Decreases in receivables, reported cash from operating activities increases.

See also: Net Revenue · Sales Returns And Allowances · Revenue

When you look at your Income Statement, this total sits at the top, before returns, discounts, and allowances. The billed week is what starts the walk; the cuts come next.

When the figure is high, the store billed more sales in the period. When it is low, fewer invoices went out, even if old invoices were collected.

The Balance Sheet does not keep this as a permanent account after the close. Unpaid billed sales sit in accounts receivable until cash arrives.

The profit and loss statement is the home for this billed total. After the close, the period's net result flows into equity, and the revenue accounts themselves reset.

On the Statement of Cash Flows, collecting those receivables is an operating inflow. Billing the sale without collecting it does not, by itself, raise cash.

How it works

The store delivers furniture, writes the invoice, and records the billed amount. The bookkeeper debits cash or accounts receivable and credits a sales account for that invoice total.

That credit is the billed sale. It is not the later bank deposit if the invoice is still open.

A cash floor sale posts debit cash and credit sales in one step, still at the ticket. An invoiced delivery posts debit accounts receivable first, and cash comes later as a collection, not as a second billed amount.

Returns, allowances, and sales discounts do not rewrite this billed credit. They sit in contra-revenue accounts and bring the billed total down to net revenue.

Stay with the invoice when you read this line. The bank balance explains what was collected, and this line explains what was billed.

Bookings are not this figure. A signed order for a dining set next spring is not billed sales until the invoice goes out.

Do not treat a customer deposit as this total if the sofa has not been invoiced. That cash is a liability until the sale is billed and earned.

After the close, sales accounts return to zero. Next month's invoices start the billed top line again.

Keep the invoices that support the period total. Anyone tying the P&L to the register and to receivables should be able to see which tickets were billed.

Example

A furniture store delivers a $2,400 sofa on Tuesday and sends the invoice the same day. Cash will arrive the following week.

The delivery is recorded:

Debit: Accounts receivable $2,400

Credit: Sales revenue $2,400

Gross revenue for the week includes the $2,400. Cash has not moved yet.

When the customer later returns a $200 lamp from an earlier ticket, that $200 does not erase this sofa credit. It posts to sales returns and allowances, and net revenue falls by $200.

If a walk-in pays $180 cash for a side table the same Tuesday, that $180 is also billed sales, recorded with a debit to cash. Both tickets are this billed total, and only one was collected on the spot.

The Income Statement for the week shows $2,580 at the billed top. The leftover after any return or discount is a smaller net number, not a rewrite of these invoices.

Common mix-ups

Gross revenue is not cash collected. Cash collected is a bank movement, and this line is the billed ticket, which may still sit in receivables.

Gross revenue is not net revenue. Net revenue is what remains after returns, discounts, and allowances; this line is the billed amount before those cuts.

Gross revenue is not profit. Profit is what remains after costs, and this line is only the billed starting total.

Related terms

• Net Revenue: Gross sales after returns, discounts, and allowances are subtracted.
• Sales Returns And Allowances: A contra-revenue account for goods sent back or price concessions given.
• Sales Discounts: A contra-revenue account for price reductions and early-payment terms taken by customers.
• Revenue: The total value of goods and services the business earned in a period.
• Invoice: The document that bills a customer and creates a receivable.
• Billings: The amount actually invoiced to customers in a period.
• Income Statement: A statement showing revenue earned and expenses incurred over a period, ending in net income.
• Average Order Value: Average revenue per customer order in a period.