📖 DEFINITIONS
✦ SALES REVENUE
Money earned from selling products or services; It includes income from both physical goods and service offerings;
→ It represents the core income for businesses, regardless of whether they sell products, services, or both.
✦ SERVICE REVENUE
The portion of sales revenue earned from providing services to customers; This includes activities like consulting, maintenance, or professional services;
→ It highlights income derived solely from service-related activities.
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🔢 FORMULAS
✦ SALES REVENUE = Total Income from Goods and Services Sold
→ Calculated by summing up revenue from all products and services sold.
✦ SERVICE REVENUE = Price of Service × Number of Services Provided;
→ Focuses on income generated exclusively from services rendered.
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⚙️ CONTEXT
✦ SALES REVENUE
→ Position in Financial Statements: It appears at the top of the income statement as the total income from all sales activities;
→ Sales revenue is the primary source of income for many businesses, encompassing both goods and services.
✦ SERVICE REVENUE
→ Position in Financial Statements: It may be separately listed under sales revenue on the income statement if the company chooses to distinguish it;
→ Useful for companies that want to analyze income specifically from their service offerings.
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📊 MORE
✦ SALES REVENUE
→ Advantages: Provides a comprehensive view of total income from all sales; Helps in assessing overall business performance;
→ Disadvantages: Combining goods and services can obscure insights into specific areas of strength or weakness.
✦ SERVICE REVENUE
→ Advantages: Allows businesses to track and analyze income from services separately; Helpful for strategic planning and resource allocation;
→ Disadvantages: May require additional accounting efforts to separate service revenue from total sales.
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💡 SUMMARY
✦ SALES REVENUE → Total money earned from selling both products and services; It's crucial for understanding the overall income of a business.
✦ SERVICE REVENUE → Money earned specifically from offering services; Important for businesses that focus on or want to track their service-related income.
→ Both are essential for a complete picture of a company's revenue streams, and distinguishing between them can provide valuable insights for management and investors.
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