What is Operating revenue? Revenue from Operations – Important Class 12

Operating revenue/Revenue from Operations

Operating revenue or revenue from operations is commonly referred to as operating income, and it represents proceeds that a business entity accumulates from its central operational activities. It is the figure amount of money made by a firm through daily dealings before non-operating expenses or incomes are deducted.

Operating revenue – Operating revenue refers to the revenue generated by a Business enterprise from its primary business activities. 

Or

Operating revenue refers to the revenue generated by a company from its primary business activities. 

Or

Operating revenue refers to the revenue earned by a Business enterprise from the Core Activities of the business enterprise.

For example, a Manufacture, a wholesaler, a retailer produces its operating revenue through the sale of goods or merchandise;

In the case of a physician, the operating revenue is generated by providing medical services.

In the case of a Lawyer, the operating revenue is generated by providing legal services.

In the case of a CFA, the operating revenue is generated by providing financial advisers, sales, and client services.

A Tax consultant derives their operating revenue from the Tax services that they provide.

Key Points of Revenue from Operations :

  • Revenue Generated from Operating activities is the regular income for any business enterprise.
  • Revenue from operation earned from the Core Activities of the business enterprise.
  • Revenue generated from Operating Activities of the business enterprise is called Operating Revenues.
  • Operating activities are the principal revenue-generating activities of the enterprise.
  • Operating Revenue is the lifeblood of any business enterprise.

 

Operating revenue is important for companies because it shows how much money is being generated in their main line of business. This is especially significant during difficult periods when firms have to generate sufficient cash flow to meet their costs and remain solvent.

What is Operating Income?

Excess of operating revenue over operating Expenses is called operating income.

Earnings before interest and tax(EBIT), also known as operating income.

There are several ways in which operating income can be calculated. The most popular one involves subtracting the cost of goods sold from total sales. Cost of goods sold entails expense on the production of commodities that the company manufactures and sells inclusive of material cost, direct labor charges as well as overheads.

Operating income= Net Sales – (Cost of revenue From operation – Operating Expenses)

Or

Operating income= Gross Income-Operating Expenses

Gross Income=Net Sales – Cost of revenue From operation 

Or

Operating income = Total Operating Revenue – Direct Costs – Indirect Costs

Revenue vs Profit

What is Non-Operating Income?

 

Non-operating revenues represent sales that arise from non-primary activities performed by an organization. Examples include dividend income, interest income, and gains resulting from disposal of assets.

Nonoperating income is the portion of an organization’s income that is derived from activities not related to its core business operations

Non-Operating Incomes = Interest Received on Investment + Profit on sale of Non-Current Assets+ Dividend received+Rent Received

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