Journalizing Revenues

Journalizing Revenues

Revenue Accounts

• Operating revenues: Revenues earned from the company's primary operations Examples
• Sales revenue: Used for recording fees earned from selling merchandise as part of the company's primary operations.
• Service revenue: Used for recording fees earned from providing services.
• Non-operating revenues: Revenues earned from secondary or non-operating activities Examples
• Rent revenue: Used for recording fees earned from tenants for rented space.
• Interest revenue: Used for recording interest earned on bank deposits or from loans given out.
• Gains: Used to record profits earned from non-operating activities such as selling long-term assets and settling liabilities.

Recording General Revenues

• Should be recorded when the revenue is earned, not when it is collected.
• When revenue is earned, the revenue account increases (credit).
• Debit account depends on situation.
• Receivable: If cash will be collected in the future
• Cash: If cash is collected at the time of revenue
• Unearned revenue: If cash was collected in the past

Recording Sales of Merchandise Inventory

• First entry is to record revenue and payment.
• Second entry is to record 'Cost of goods sold' and to decrease inventory asset account

Example: Journalizing Revenues

1. Provided customer with service at a cost of $500, the customer paid in cash.

1. Sold merchandise to a customer on account for $1,000. The cost of the inventory sold was $300.

1. Delivered goods to a client's warehouse. The merchandise had a cost of $4,000 and was sold for $9,000. The customer had paid for the inventory when the order was placed 2 weeks prior.

1. Earned $100 of interest on bank account balance, the interest was automatically deposit to the company's account.

1. Received an order from a customer 200 units of inventory, the selling price is $30 per unit.