Cleverpens

By: Fatima W.Q. Jayme, MBA, EdD., LPT

In the world of books and humans, language cannot exist without words. In time, a prosimetrum was created, combining Western and Eastern cultures. Linguistics is one of the tools used in forensic accounting. How to appreciate the functioning of the left brain and the right brain in the world of numbers?

Linguistics examines how accounting itself functions as a language, influencing decision-making, and how specific linguistic features, like future-time references and gendered language, affect financial reporting and professional participation.

An account is a record of transactions involving individual assets, liabilities, stockholders’ equity, revenues, and expenses.

Proceeds is a very general term used to designate the total amount realized or received in any transaction, whether it be a sale, an issue of stock, the collection of receivables, or the borrowing of money.[1]

Revenues, sales, and income are often interchangeable. These are used to measure financial performance.  Most can interchange these words, but it is significant to know how these words affect business performance in the area of recording transactions.

1.  REVENUE. SALES and INCOME

Matrices	Revenue	Sales	Income
Paradox	Not all revenues are sales.	All sales are revenue.	All revenues and sales are money from business operations and are considered income.
Definition	The total amount generated by the company from all sources during a specific period.	The total amount generated by selling the company’s goods and services.	Total amount generated minus business operation expenses.
Coverage	Selling of goods and services, interest, royalties, rental income, dividends, and other sources.	The selling of goods and services is from the main business operation.	All sources less expenses.
Calculations	Summation of all monies from other sources plus sales.	The number of units sold multiplied by the price per unit.	Income is calculated by subtracting the total costs (including operating expenses) from the total revenue.
Belief	The amount is larger than the sales.   It may be padded with one-time business deals.	The amount excludes businesses that aren’t aligned with the core business of the entrepreneur.	The amount includes all amounts from various sources such as sales, royalties, and other add-ons, less all operational expenses.
Indicator	Indicates the company’s ability to invest and allocate its resources to maximize the earning potential.	It indicates the company’s competence in selling its primary goods and services to make profits.	It indicates the speed at which the company earns and spends in a given period.
Calculations	Add all the money sources from all industries where the entrepreneur has a business.	Add all money derived from core business activities, products, or services.	Add all money derived from all sources, minus all expenses relevant to business management
Example	The sales of a bakery are ₱20,000, and the income from other sources is ₱10,000, then the revenue would be ₱30,000	Suppose products sold by the bakery are 2,000 units, and the price is ₱5.00 per unit, then the sales would be ₱10,000	Assume the products sold by the bakery totaled ₱30,000 and business operation expenses ₱10,000, then the income is ₱20,000

Revenue, sales, and income may sound similar, but they are entirely different.  Revenue is when the company receives consideration for selling goods/services.  On the other hand, we deduct the cost from the revenue to compute the income. 

The above metrics require an understanding of business financial health. For example, government agencies may sell goods or services and typically report their sources of funds as revenue. Additionally, revenue differs from cash flow.

Cash flow is the net amount of cash being transferred into and out of a company. Revenue provides a measure of the effectiveness of a company’s sales and marketing, whereas cash flow is more of a liquidity indicator.[2]

1. Revenue accounts are those that report all the sources of cash. 

Types of Revenues:

1. Operating Revenue is generated from core business activities like the sale of goods/services rendered.
2. Non-Operating Revenue is generated from secondary sources. Unrelated to the primary business activity. Examples include rent, interest, dividends, and royalties.

Revenue varies based on the nature of the transaction and the payment method.  Total earnings can either be accrued revenue or deferred revenue.

1. Accrued Revenue happens when one party fulfills their part of the transaction, giving the goods or providing services to the customer, but the other party has yet to make the payment.  This is often called accrued income.
2. Deferred Revenue is when the customer pays the firm in advance, thus the company has not yet delivered the goods or services in exchange for the advance payment.

Steps in computing revenue:

• Number of units sold or the number of customers served during a given period.
• Compute by multiplying the number of units sold by the unit price.
• Should there be different individual earnings from each business segment, then individual earnings must be added together to compute the gross sales.

Illustrative Problem 1: Compute the revenue if the formula is unit price x units sold.

            Assume FatTea sells three different sizes of Milk Tea.  For the year 2022, sales were as follows

Tea Grades	Unit price	Units sold	Revenue FatTea
AAA	₱150	2,000	₱ 300,000
BBB	₱180	1,800	324,000
CCC	₱220	1,500	330,000
Total Revenue			₱ 954,000

Illustrative Problem 2: 

Buzz Phone provides internet access services to customers.  In 2022, it was able to serve 350,000 customers and charged ₱50.00 for each of them.  Compute the total revenue of the business.

Answer: 350,000 x 50.00 = 17,500,000.00

Although revenue is often understood as sales on the income statement, these accounting terms aren’t the same.  Revenue is broader in scope than sales.

• Total Revenue: It is the gross amount of money a company earns.  It’s the “top line” of the financial statement, whereas the income is the “bottom line” of the financial statement.  It is computed by adding all the sales invoices in a given period.

Illustrative Problem 2.1:  Sapotes Inc. has the following sales transactions in sales invoices.  Determine the total revenue of Sapotes Inc.

Periods	Invoices	Transactions	On record	Daily Revenue
1	889	Net sales were ₱400	A ₱100 discount is given on the said invoice	₱500.00
2	890	Net sales ₱45	The goods were sold with a ₱5.00 discount	₱50.00
3	891	A shoe had a small defect.  After the allowance was given, the total amount paid by the customer was ₱60	An allowance of ₱10 was given to the customer for the defect	₱70.00
4	892	The net sales are ₱50	It has given a 10% discount	₱55.00
5	893	The net sales were ₱80.00	After a discount of 20%	₱96.00
6	894	The net sales were ₱90.00	After a discount of 10%	₱99.00
Total Revenue				₱870.00

• Gross Sales:  Total revenue from sales AFTER deducting sales discounts, sales allowances, and sales returns. 

Illustrative Problem 2.2: Sapotes Inc. has the following sales transactions in sales invoices.  Determine the total revenue of Sapotes Inc.

Day	Invoice numbers	Transactions	On record	Daily Sales
1	889	Sales were ₱500	₱100 given on the said invoice	₱400.00
2	890	Sales were ₱50	₱5 of the goods were returned	45.00
3	891	The total amount paid by the customer was ₱70	The customer complained about a slight defect, and an allowance of ₱10 was given to the customer for it.	60.00
4	892	Sales are ₱50.00	It has given a 10% discount	45.00
5	893	Red shoes sell at ₱100.00	After a discount of 20%	80.00
6	894	The net sales were ₱90	After a discount of 10%	81.00
Gross sales

4. Compute the Total Revenue and the Gross Sales

Dandelion Confectioner (DC) is a candy shop that sells chocolates and confections. The shop conducts various sales throughout January, and the owner wants to ensure the accounting records are updated. He has provided the invoices, and he needs you to calculate th1e gross sales based on these documents.

	Total Transactions	Receipted and On Record	Total Deduction	Total Revenue	Gross Sales
823	Eight (8) customers paid ₱500.00 each.	There is a 10% payday discount.	₱ 400.00	₱ 4,000.00	₱ 3,600.00
824	₱1,200.00 x 5 participants registered early.	5% discount for early bird conference attendees.	300.00	6,000.00	5,700.00
825	Candies are priced at ₱300.00/pack, and 10 packs were sold.	10% discount on near-end shelf-life candies.	300.00	3,000.00	2,700.00
826	10 customers paid cash and availed of the discount.	10% minimum purchase of ₱500.00 receipted	500.00	5,000.00	4,500.00
827	Customer #1 ₱ 3,000.00 Customer #2 ₱ 1,500.00	Minimum purchase of ₱3,000.00 with 10% discount.	300.00	3,000.00      1,500.00	2,700.00         1,500.00
828	₱13,500.00 cash paid by customers	10% discount for cash-paying customers.	1,350	13,500.00	12,150.00
829	Five customers paid ₱2,000.00 each.	10 % discount for minimum ₱2,000 cash-paying customers.	1,000	10,000	9,000.00
	Totals		₱4,150.00	₱46,000.00	₱41,850.00

Calculate the Gross Sales:  Chair Moo is a furniture dealer that records sales in January and offers a 10% discount if payment is made within ten days of the sale date. With net sales for January at ₱95,000, the company anticipates receiving a substantial portion of sales during the discount period, improving cash flow for the coming months. This approach promotes timely payments and builds customer loyalty by providing a financial incentive. Payments made within ten days account for 50% of the gross sales.

Answer:

Accounting title	Computation	Answer
Gross Sales	95,000/ [1-.10]	105,555.55
Less:  Discounts	105,555.55x.10	10,555.55
Net sales		₱    95,000.00

The next time you read accounting books you know better.

Until next time.

Fatima W. Jayme, MBA, EdD, LPT

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^[1] _{American Institute of Certified Public Accountants. Committee on Terminology, “Proceeds, revenue, income, profit, and earnings; Accounting Terminology Bulletins, no. 2” (1955). American Institute of Accountants. 357. https://egrove.olemiss.edu/dl_aia/357}

_{^[2] Hayes, A. (2025, May 31). Revenue: Definition, Formula, Calculation, and Examples. Investopedia. https://www.investopedia.com/terms/r/revenue.asp}