Revenue, in simplest terms, the benefits entity receives on carrying out its main business activities. Though entity can earn income in many ways but not every activity is its main business activity and not every income is revenue. For example, a furniture manufacturer can earn an income on selling drilling machine at a price higher than its carrying amount but it is not its revenue as its main business is to sell furniture items and not drilling machines.
According to IAS 18 Revenue is defined as:
Revenue is the gross inflow of economic benefits (received and receivable) during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.
Another important aspect evident from the definition is that revenue is the inflow of economic benefits received or receivable i.e. revenue is recorded on the basis of accrual concept. For example if the entity has sold an item then revenue is earned at the time of sales whether the cash is received of not.
Also earning a revenue does not always result in cash inflow but it will surely result another asset to increase or a liability to decrease. For example entity sold an item to customer and in return customer paid the electricity bill of the entity.
Receipt or Cash receipt on the other hand is cash inflow for any reason i.e the cash received by the entity. As said earlier that as a result of revenue earned entity can receive cash. But just like not all revenue results in cash receipts, same way not all cash receipts are because of revenue earned. Sales receipt is the term used to represent cash receipts as a result of sale.
- Entity took a loan from the bank and received the cash.
- Receiving cash from a debtor to whom entity lent some money
- Selling scrap or discarded asset and receiving cash
- Issuing debentures or bonds and receiving cash this regard
- Fulfilling the conditions and receiving grant money from government
Digging deeper to understand the revenue and receipt relation, it is often observed that revenue and receipt are not always equal. For example entity sold some goods to its customers for 1000 USD and later received only 800 accepting 200 USD as a settlement discount. Here the revenue is 1000 whereas receipt is 800 only.