Revenue

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Querist : Anonymous

Querist : Anonymous (Querist)

14 September 2014 How to treat revenue in balance sheet. Where it is shown in balance sheet and financial statements and under which head?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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15 September 2014 revenue is shown in Profit & Loss A/c friend

Querist : Anonymous

Querist : Anonymous (Querist)

15 September 2014 except p/l where it is shown in Financial Statements and what is the journal entry?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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21 July 2025 Great question! Let me clarify how revenue is treated in accounting and financial statements:

1. Where is Revenue Shown?
Revenue is primarily shown in the Profit & Loss Account (P&L Account) (also called Statement of Profit and Loss).

It represents income earned during the accounting period from the sale of goods or services.

2. Is Revenue Shown in the Balance Sheet?
Revenue itself is NOT shown directly in the Balance Sheet.

However, the impact of revenue flows through to the Balance Sheet via Retained Earnings (or Profit & Loss Account balance) in the Equity section.

If revenue exceeds expenses, Net Profit increases Equity via Retained Earnings.

Conversely, if a company has accounts receivable related to revenue earned but not yet received, that appears as an asset (Current Asset) in the Balance Sheet.

3. Under Which Head Does Revenue Affect the Financial Statements?
In the Profit & Loss Account: Revenue is shown under Income or Sales.

In the Balance Sheet:

Retained Earnings (in Equity) increase by the net profit derived from revenues.

Accounts Receivable (Current Assets) represent amounts yet to be received for revenue recognized.

4. Example Journal Entry When Revenue is Earned on Credit:
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Accounts Receivable A/c Dr. ₹XXX
To Revenue/Sales A/c ₹XXX
This records revenue earned but cash not yet received.

When cash is received:

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Cash/Bank A/c Dr. ₹XXX
To Accounts Receivable A/c ₹XXX
5. Summary:
Statement Where Revenue Appears
Profit & Loss As Income or Sales
Balance Sheet Indirectly via Retained Earnings (Equity) & Accounts Receivable (Assets)

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