Related article Net Income: Formula, Definition, Explanation, Example, and Analysis Non-Operating Revenue For instance, the cleaning service provider will have operating service revenue from proceeds received against cleaning services. The operating revenue is the revenue that can be compared year-to-year in the financial statements of a business entity. Advertisements Operating RevenueĪll the service revenue earned by a company providing services as a normal business or primary business activity is treated as the operating revenue. The service revenue can be further categorized into operating and non-operating service revenue. Such types of services are usually one-time, and proceeds are recorded as transaction-based revenue. It can be a single-time service purchase and usually not an ongoing one.įor instance, a car selling company provides an additional car protection service that is given when a new car is sold. Transaction-Based Revenueįinally, transaction-based revenue is also treated as service revenue. For instance, subscription-based businesses, insurance companies, monthly rent, annual licensing fees, etc., all come under the scope of recurring revenue. Recurring revenue also comes under the service revenue when the company has recurring clients. If you want to get a car wash, you will have to pay separate charges that will be different from the former. For instance, if you stop by a local mechanic to get your car tire fixed, service revenue will be against a specific service. The nature of business earning service revenue can vary a lot. Service revenue is the revenue generated by providing a specific service: a one-time cleaning service, financial consultation, tax return filing, spa, salon, makeup artist, etc. If a company provides project-based services, the service revenue earned will be called project revenue. ![]() The revenue earned by the project accountants is also project revenue. Similarly, project accountants are hired to provide services for specific projects. As soon as the audit completes, the contract is concluded and the firm gets paid for services. Service revenue of a business entity providing services can come from any of the following heads: Project Revenueįor instance, an audit firm works independently and is hired by different entities to perform an annual audit. Related article What Is the Difference Between Adjusting Entries And Correcting Entries? What Is Treated As Service Revenue? The service revenue is nothing different from the normal revenue earned by a company to cut it short. Similarly, a cleaning service provider will also earn service revenue against the cleaning services provided to its clients as agreed upon between the two parties. Therefore, the revenue generated by the firm will be treated as the service revenue. A financial consulting firm will be providing financial services and solutions to clients. Let’s take an example to understand the scope of service revenue. In other words, the revenue earned against service provision is called service revenue. The term service revenue is used for the revenue recognized in lieu of the services that have already been provided to the clients, irrespective of the cash received. Service revenue is defined as the sales or earnings of a business entity that are related to the services provided to the clients/customers. Recording of the service revenue by the business entities involved in the trading of goods and commodities as well as the service sector will be discussed in this article. Therefore we will discuss the debit or credit nature of service revenue as well as the financial treatment. Many people have ambiguity about what service revenue is and what is the accounting treatment. Whereas, the revenue generated from the normal business is treated as direct revenue. ![]() The revenue generated from operations other than the normal business is usually treated as indirect revenue. ![]() Normal business is defined as the main activity identified in the business entity’s prospectus and memorandum of association. Therefore, the recognition and recording of the revenue are governed by certain accounting principles and regulations. However, the business entity might earn revenue from other than the normal business operations like capital gain on the sale of assets, selling a part of business, or return on investment in security. In general, revenue is defined as the earnings of any business entity from normal business operations that can provide services or sell goods. Therefore, they perform different operations like manufacturing & trading of goods or provision of services. The primary purpose of any business entity is to make a profit through revenue generation activities.
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