Accounting what is revenue? The type of revenue & principles recorded according to accounting Standards

Many businesses today are still not clearly distinguish between revenue, other income and cash flow, the income from which to deviations in the determined profit potential risks reduce your tax governance. When the scale of operations expansion, business model increasingly diverse or boost converter numbers, requires control revenue transparency and consistency becomes more important.

Article below Lac Viet will the business make clear the nature business, the principles recorded according to accounting standards, how to implement in practice and the role of this content in financial management, modern, and analyze the application accounting system, ERP in order to improve management efficiency.

1. Accounting what is revenue?

1.1. Concept of accounting recognize revenue under accounting standards

Revenue is not merely the amount sold, which reflect the results of business activity in the states. According to the accounting Standards in Vietnam VAS 14, revenue is the total economic benefit businesses have or will collect from business activities, usually, increase equity, not including the capital contributed by the owner.

Accounting revenues are recorded, monitored, and controlled the revenue arising guaranteed reflect the true nature of transactions, the right time, as well as compliance with regulatory accounting – tax. Thereby the basis for determining the profit, calculate the correct tax obligations and evaluate sales effectiveness, market.

Many businesses, especially in the stage of standardized accounting system or conversion of, often confuse revenue – cash flow earned. So, in accounting need to distinguish three basic concepts the following:

In summary, accounting, revenue recognition not only serve bookkeeping but also the administration tool important, to help businesses properly reflect the business results as well as support the correct decision. Therefore, understanding properly apply accounting standards in actual operation is required pivotal for the organizations and enterprises.

1.2. Why accounting revenue plays a key role in business?

Accounting revenue recognition not only reflects the number of accounting data that is pillars of information systems corporate finance. Recorded and revenue management accurate not only meet the requirements accounting – tax, but also directly supported operating, strategic planning, as well as to evaluate business efficiency.

• Revenue is the basis for determining the profit & tax obligations: revenue recognition at the wrong time or in the wrong nature will distort trading results, influence the decisions of management. At the same time, due to turnover is the basis of VAT – CIT, mistake in recognition may lead to tax risks and financial losses for the business.

• Directly affect report results of business activities: reporting the results of operations general business revenue, costs and profit to evaluate the operational efficiency. Revenue recognition the right principles help figures reflect the fact. Thanks to that, board of directors and investors are the basis of reliability for strategic decisions, forecast financial.

• Closely related to sales management – public debt – cash flow: Due to be recorded when delivery of goods and services, not depending the time of collection. Accounting revenue helps to control public debt and balance cash flow. Track not closely can lead to high turnover, but negative cash flow, affect the business operation.

In summary, revenue is the pillar of the financial system business. Proper recognition, timely help to accurately reflect the results of the business and control cash flow and tax compliance. At the same time create a platform reliable data for management and operating efficiency.

2. Job description accounting revenue in business

The last recorded, as well as revenue management is hitched critical of the financial system, mounted directly with sales, financial statements, liabilities and cash flows. Properly understand the business helps the business organization, accounting, it, limit deviations figures enhance effective governance decisions.

2.1. The main task of accounting for revenues

Accounting responsible for the beginning of the following with the goal of ensuring revenue is recorded properly, fully and timely. From that provides accurate data for management decision-making:

• Track contract economic – order – bill of sale: this work consists of checking the sales contract, order confirmation, delivery conditions, payment and invoice output. This is the first step to ensure revenue is recognized in accordance with accounting.

• Revenue recognition & tracking receivables according to each customer contract: is done when business obliged to complete the delivery/service, have the right to economic benefits. Through which control the public debt, payment term, as well as manage cash flow effectively.

• • Reconcile revenue to the business department, sales: Help secure data recorded properly reflect the contract and the status of delivery, providing actual services. Constant collaboration between business – accounting help early detection of errors, limiting the risk report as well as enhance effective coordination internal.

• Reporting, recurring revenue service administration & settlements: is a key task, provide data for the leadership evaluate the effectiveness, sales support, financial department to control cash flows – public debt to ensure the tax declaration regulations, and as a basis for analysis in decision management.

2.2. Skills & competencies required of accounting revenue

To effectively implement the tasks mentioned above, accounting, revenue recognition, the need to possess the following skills:

• Understand the regulatory accounting – tax related to sales: the accountant should make sure time, conditions recorded how to handle the account adjusted revenue under accounting standards and tax rules. Thereby limiting the risks of false financial statements, tax arrears in the audit process.
• Skills analysis – aggregate financial data: accounting must handle large amounts of data from many different sales channel. Skills analysis helps detect trends, revenue, deviations from the plan as well as the cause fluctuations in the data.
• Be careful – accurate – compliant process: revenue is the data input of many financial reports important. The flaws though small in revenue recognition can lead to reported profitability false, influence the decision of management.
• Ability to coordinate well with the parts related: is requesting key in revenue management. Effective coordination with the sales department, stock and debt collection help timely updates of the transaction, confirm the delivery, as well as control the flow of money. Thereby improving the accuracy of data, shorten the processing time business.

Job description accounting recognize revenue to help businesses standardize processes, compliance with accounting – tax enhance the reliability of data. This is the foundation support and coordinate internal decision-making governance effective.

3. The type of revenue in the business today

Correct classification of revenue not only to meet the requirements accounting – tax but also help enterprises to clearly identify the sources of value creation, sustainable level of each activity. If not, separate the type of revenue, the analysis of business performance and evaluate core competencies will be more prone to false.

3.1. Sales & service provider

This is a source of revenue to the core, reflecting direct energy business your primary business. Sales revenue, service provider arising from the activities often repeat associated with business model mainstream. Specific:

• Commercial enterprise: revenue arising from the purchase of goods and resell to customers. Sales value, reflecting market size, sales effectiveness.
• Manufacturing business: revenue coming from the sale of finished products or semi-products after the manufacturing process. This is the basis to evaluate production performance, the ability to compete on price.
• Business services: revenue from providing services under the contract, usually associated with implementation progress, or duration of service provision.

Sales revenue, service providers is the most important indicator to assess the health business long-term. Leaders often rely on this revenue to:

• Construction business plan budget year.
• Evaluate the effectiveness of each product and service market.
• Strategic decision price, open, wide or narrow operation.

With respect to the organizations and enterprises are to find out information about accounting, revenue tracking details sales revenue by product, contract, customer or sales channel help detect early trends, growth or decline, from which adjust strategy timely instead of just looking at total sales final.

3.2. Revenue financing activities

Revenue financial operations is the revenue arising from the use of capital as well as financial activities, not directly associated with the main business activities. This group includes:

• Interest on bank deposits, interest-free loans.
• Interest rate difference.
• Income from financial investments such as dividends, profits are divided.

Revenue financing activities reflects the efficient capital management, financial policies of the business. A business has cash flow idle used reasonable will create additional sources of finance to contribute to improve overall profitability.

However, the financial turnover does not reflect the capacity of the core business. If the proportion of fiscal revenue increase in the sales revenue does not increase, respectively, leaders need to review the operational efficiency of the business.

Thus, when accounting and analysis, accounting need to track private sales, financial help businesses:

• Properly assess efficient use of capital.
• To avoid confusion between profitable growth of major business growth due to financial factors.
• Provide accurate information for decision-making, investment and risk management.

3.3. Other income

Other income is the income does not arise often, not of the main business activities or financing activities. Common examples include:

• Proceeds from liquidation, sale of fixed assets.
• Collection of fines for breach of contract, amount of compensation.
• Revenues and other abnormalities.

In fact, many business risks as noted mistakenly other income of the sales revenue, leads to deviations revenue targets and “beautiful” business results in a way not sustainable. This is especially risky when businesses work with banks, investors, or in the u.s. audit, tax inspectors.

From the perspective of management, other income should be:

• Recorded true nature, clearly separated;
• Just see the factors that support short-term profits, not used as a basis for evaluating business performance long-term.

With respect to the organizations and enterprises are to find out information about accounting for revenues, the understanding and classification of true income other help avoid the wrong decision, such as business expansion based on extraordinary profits do not repeat.

4. Principles of revenue recognition under accounting regulations

Many false statements, tax risk and audit doesn't come from the wrong account, that due to the recognition of revenue at the wrong time or in the wrong nature. Therefore, the master principle of revenue recognition is required, particularly when the scale as well as the level of complexity of transactions is increasing.

According to the accounting Standards in Vietnam VAS 14 – the Ministry of Finance, revenue is recorded only when fully meet the conditions to reflect true economic value actually incurred.

4.1. Conditions of revenue recognition according to VAS

The conditions for revenue recognition according to the VAS as a “safety filter”, help businesses avoid recognition of revenue too soon or don't have the ability to recover. Specific:

• Business has transferred the risk & benefits associated with goods or services for buyers: News no longer be responsible for the goods or service results. This condition, in order to avoid recognition of revenue too soon when the goods remaining in the warehouse or services unfinished, from which ensure business results reflected properly according to each states.

• Revenue is determined with relative certainty: revenue is recorded only when the transaction value has been clearly defined, often expressed through contracts, orders or invoices. If the sale price also depends on the conditions uncertain, businesses need to be cautious when recorded.

• Business has the possibility of obtaining economic benefits from the transaction: The customer can afford to pay, do not exist dispute key. This condition aims to restrict sales “virtual”, to avoid high profits on the books but not the money is collected, cause weight loss for cash flow as well as risk-adjusted financial statements in audit, tax inspectors.

4.2. The time of recognition of revenue – corporate problems or wrong

In fact, consulting and commissioning, it is the content that a lot of businesses are adopting not true, especially medium enterprises/small or new organizations standardized accounting system. The most common mistake is to confuse the time of invoice, the time of revenue recognition. Specifically, many businesses said that:

• There are bills, then revenue recognition;
• No bill has yet to be recorded in revenue.

The way to understand this is not entirely true according to accounting standards.

According to VAS, revenue is recorded when economic transactions have completed, in essence, that is, when the business has delivered the big risks, benefits. There is the possibility of obtaining economic benefits, not absolute dependence on the time of invoice.

Illustrative examples: Business invoice at the end of the month to keep up with the progress of the contract, but the actual goods have not been delivered to the customer. In this case, although there was bill, businesses that are not eligible revenue recognition under accounting standards.

On the contrary, there are cases where businesses have to hand over the goods, the customer has acceptance but the bill was deferred to the states after. When that revenue should still be recorded properly states arose, intended to accurately reflect the business results.

The actual value of the recognition of the right time:

• Help the financial statements properly reflect the business performance in each period.
• Avoid bad profits “leap” or “drop unusual” between the states.
• Reduce the risk of tax authorities suspect adjusted revenue for the optimal tax.
• Create platform reliable data for analysis, management and decision-making.

According to the analysis of the audit unit, errors in revenue recognition is one of the most common causes leading to adjusted financial report after the audit, especially in the business has built process control revenue tightly.

5. Accounting revenues in real business

Service revenue related more closely to sales, contracts, bills, debts and cash flow. Process lack of control to cause deviation of data, risk, public debt as well as reduce reliability report. Revenue so need to be managed as a management tool, not only is the recording window.

5.1. Process accounting revenue from the sale to collect money

An accounting process efficiency in business usually consists of four main steps below:

• Step 1 – Set up sales invoice: Invoice is evidence from legal record sales transactions between businesses and customers. However, from the perspective of financial management bill, not only serves the purpose of the tax, which is also grounds for accounting collated with contracts, orders, and actual delivery.
• Step 2 – revenue recognition: After the transaction meet the conditions under accounting standards, accounting practices recorded revenue on the books. This is the step that reflects the results of actual trading of the business in the period, does not depend entirely on the work obtained the money or not.
• Step 3 -track accounts receivable: is the revenue was recorded but have not yet collected the cash. This should be monitored in detail according to the customer, the contract as well as payment term to control risks, as well as proactive cash flow, especially with the business deferred sales.
• Step 4 – compare & collect money customers: When a customer billing, accounting for the proceeds with public debt was recorded to confirm the revenue was transformed into cash flow, at the same time timely detection of revenues missing, wrong or slow. This is the complete life-cycle revenues, ensure business results are realized into financial resources.

5.2. The accounting entries accounting revenues popular

Accounting profession often revolve around some pen basic math. Understanding the nature of accounting is to help businesses avoid recorded wrong, easily control data.

• Accounting revenue recognition: Ghi nhận giá trị hàng hóa, dịch vụ đã hoàn thành và phát sinh quyền thu tiền theo nguyên tắc dồn tích, phản ánh đồng thời doanh thu và kết quả kinh doanh của kỳ (Nợ 131 – Phải thu khách hàng / Có 511 – Doanh thu bán hàng và cung cấp dịch vụ).
• Bút toán thu tiền: Phản ánh việc doanh nghiệp đã nhận tiền từ khách hàng bằng tiền mặt hoặc chuyển khoản, làm giảm công nợ phải thu nhưng không làm tăng doanh thu do doanh thu đã được ghi nhận trước đó (Nợ 111/112 – Tiền mặt/Tiền gửi ngân hàng, Có 131 – Phải thu khách hàng).
• Bút toán giảm trừ doanh thu: Phản ánh các khoản chiết khấu thương mại, giảm giá bán hoặc hàng bán bị trả lại nhằm điều chỉnh doanh thu về giá trị thực tế phát sinh trong kỳ, đảm bảo doanh thu thuần và hiệu quả kinh doanh được phản ánh chính xác (Nợ 521 – Các khoản giảm trừ doanh thu / Có 511 – Doanh thu bán hàng và cung cấp dịch vụ).

5.3. Errors frequently encountered in accounting for revenues

From practical advice – operated in many businesses, there are three groups of errors that popular organizations and businesses are to find out information about accounting in need of special note:

• Revenue recognition the wrong time: a common error, usually due documented by invoice instead of according to the nature of transaction, resulting in revenue and profit between the states skewed increases the risk adjusted financial statements when the auditor.
• Do not track revenue & debt details according to the contract, the customer: When revenue only be tracked synthetic, business difficult to control public debt, to develop bad debt as well as take proactive cash flow. This is a common problem in the fast-growth business, but not yet standardized accounting procedures.
• Affect financial reporting & tax obligations: errors in accounting, revenue recognition entail implications lines: financial reporting inaccuracies, tax obligations, deviations and legal risks. Under the guidance of the Ministry of Finance, revenue is one of the indicators often be the tax audit focus test.

6. Solution management accounting Accnet ERP effective for business

AccNet ERP is not merely accounting software serves the declaration and payment of tax, which is designed as a platform management accounting master. This solution supports business strictly control the revenue, cost, liabilities as well as cash flow on the same system. From which enhance financial transparency, the quality of governance decisions.

AccNet ERP helps businesses:

• Standardized accounting procedures revenue: revenue is recognized throughout from contracts, orders, invoices to receivables secured the right time, right quality according to standard accounting – tax rules, limiting the maximum errors manually.
• Transparency of financial data: accounting Data is the focus, continuity between the parts, which allows tracking as well as for projection of revenue, public debt, cash flow, real-time, enhance reliability of financial reporting.
• Risk control & capacity management: Systems support analysis of revenue by contract, customer, product, and time, help leadership identify early risks, liabilities, evaluate business performance and to adjust the strategy in a timely manner.
• Ready for transformation of financial & scaling: the process is digitized, automation helps businesses operate is flexible, easy to scale without increasing risk management or depends on the individual.

ACCOUNTING SOLUTIONS ACCNET ERP INTEGRATED AI AUTOMATE ALL BUSINESS

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In summary, accounting, revenue is not only recorded data that is pillars reflect business performance capability financial management. Recorded true essence, the right time, as well as control the relationship between revenues – liabilities – cash flow help businesses reduce risk, increase transparency, enhance the reliability of financial reporting. So, the accountant should be held to standardize service management platform for business decisions accurately.