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Stocks 301: The Income Statement

Introduction to The Income Statement Revenue on the Income Statement Expenses on the Income Statement Important Income Statement Calculations Accrual Accounting Summary of The Income Statement
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Revenue on the Income Statement

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Revenue on the Income Statement

While income statements for companies in different industries may not look exactly the same, almost all of them begin with the company’s revenue for the period. Revenue, which is sometimes called "sales," represents the amount of money a company brings in for selling its goods or services. (Because banks and some other financial institutions make money from interest—i.e., they don’t really "sell" anything—their income statements look different.)

Things To Know

  • Revenue is sometimes called "sales."

How companies record revenue

Depending on the nature of a company’s revenue stream, a company will record revenue in one of several ways. When you buy a phone from Best Buy (BBY), for example, Best Buy recognizes revenue when you give the company your money or your credit card and walk out with your purchase. As another example, an insurance company will "recognize," or earn and record, revenue from premiums that you pay gradually over the period in which you are covered. Be sure to check out a company’s "revenue recognition policy," which can be found in the notes accompanying its financial statements, to see how it accounts for its revenue.