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What is net revenue? Instructions on simple and detailed calculations

Net revenue is often used in businesses to help make effective financial assessments. Understanding this index not only helps businesses understand the business situation but also make appropriate plans. In the article below, let's learn with 1C Vietnam what net revenue is and the content related to net revenue in detail.

1. What is net revenue? Implications for businesses

Net revenue is the amount of money received from sales of goods and services after taxes and deductions have been deducted such as: Sales discounts, returned revenue, import and export taxes and discounts. commercial stage.

Accordingly, net revenue is very important in truly reflecting the business performance of the enterprise in each period. Based on this index, businesses can determine and evaluate good or bad operating results, understand the situation of product consumption in the market, money collected, profit before and after tax,...

With net revenue, businesses will be able to easily determine the final profit that the product brings and make appropriate changes to boost revenue.

What is net revenue?
Net revenue is the basis for businesses to determine their business performance

2. Formula for calculating net revenue applicable to businesses

Net revenue is determined according to the formula:

Net revenue = Revenue - Revenue deductions

In there:

  • Revenue: Is the total value of all products sold by the business.
  • Revenue deductions: Includes import and export taxes, special taxes, value added tax, sales discounts, sales returns and trade discounts.

For example: The revenue of a business A in the first quarter is 2,000,000,000 VND. In there:

  • Expenses for organizing discount and customer appreciation events: 60,000,000 VND
  • Tax payable: 100,000,000 VND

Thus, the net revenue in the first quarter of the enterprise is: 2,000,000,000 - 60,000,000 - 100,000,000 = 1,840,000,000 VND.

What is net revenue?
The formula for calculating net revenue is revenue minus revenue deductions

3. Note when transferring net revenue

The transfer of net revenue to the account to determine business results at the end of the period according to Circular 200 is determined as follows:

  • Debit Account 511: Revenue from sales and service provision.
  • Credit: Account 911: Determination of business results.

Enterprises need to account for net revenue transfer in parallel with the transfer of revenue deductions (sales discounts, trade discounts, sales returns, other revenue reductions arising during the period).

This transfer will be recorded in account 511:

Debit Account 511 - Revenue from sales and service provision

Credit Account 521 - Revenue deductions.

What is net revenue?
Enterprises must carry forward revenue deductions to determine net revenue

4. Factors that directly affect net revenue

4.1 Quality of products and services

The quality of products and services (design, style, ability to meet market demand, etc.) affects the value of products and services, affecting sales and net revenue of the business. Karma.

If the product/service is of high quality, the seller can set a higher price and vice versa, low product quality will lead to low prices. From there, consumers can evaluate the level of payment for the quality of the business's products .

What is net revenue?
Service quality determines the ability to reach consumers

4.2 Product consumption and production volume

Consumption volume and product production are two factors that affect each other and are directly related to the net revenue of the business. If the number of products produced exceeds consumption demand, there will be inventory of goods, which will affect the business's revenue.

However, if the number of products produced matches the market's demand, the consumption of goods will become easy, helping businesses increase revenue.

What is net revenue?
Businesses need to consider consumption levels to produce appropriate products

4.3 Price of finished products

The price of finished products directly affects the quality, product volume and revenue of the business. When the selling price increases while other factors remain unchanged, revenue from sales will increase and vice versa.

Furthermore, the price of finished products also affects consumers' purchasing decisions. When selling prices increase, consumption usually decreases; when selling prices decrease, consumption tends to increase.

What is net revenue?
The price of finished products must be consistent with consumption capacity

4.4 Sales policy

If the manufactured product is well received and meets demand, product consumption will become easy and the business's sales revenue will also increase. However, if you want to increase revenue, businesses need to deploy appropriate sales policies for each customer to ensure proper implementation of inventory, import and export principles.

Therefore, in order for administrators to understand the details, accountants need to provide revenue reports for each item, sales employee, etc. so that administrators can clearly understand the details.

What is net revenue?
Businesses should have appropriate sales policies

4.5 Consumption market

The demand for products/services determines the development and growth of revenue from sales activities of the business. Expanding export markets is the way to increase product consumption scale. Therefore, before doing business, administrators must research the market to understand the needs and increase market share for the business.

What is net revenue?
Expanding the consumer market is the way to increase revenue for businesses

4.6 Structure of consumed products

Currently, many businesses have deployed production and sales of many products with diverse structures to meet the increasing consumption needs of consumers. This not only helps increase revenue but also positively impacts business profits.

What is net revenue?
Diverse product/service sources help increase choices for customers

5. Distinguish net revenue from business concepts

5.1 Distinguish between net revenue and revenue

Net revenue and revenue are two completely different indicators, but they still confuse many accountants. First of all, a business's revenue (full name is sales and service provision revenue) is the entire economic value that the business has through production, business, sales and consulting activities. service consultation. This indicator is determined based on the following formula:

Revenue = (Total value of products sold/number of people experiencing the service x Product/service unit price) + Other surcharges

Net revenue of an enterprise is the economic value that an enterprise has after subtracting other revenue deductions from its total revenue. The specific formula is as follows:

Net revenue = Revenue - Revenue deductions

In short, there will be a difference between revenue and net revenue equal to the value of all revenue deductions during the period of the business.

What is net revenue?
Common confusion between sales and net sales

5.2 Distinguish between net revenue and profit

In fact, these two concepts are completely different. High net revenue does not necessarily mean high profits. Net revenue reflects performance in trading goods and products/services, while profit is calculated based on the performance of investment activities.

What is net revenue?
Enterprise profits are the final results of production and business activities

Thus, 1C Vietnam has answered questions about what the concept of net revenue is and some items related to net revenue. Hopefully the above information will help administrators apply it to effective business management, helping to increase revenue. In addition, to update more information on corporate governance, don't forget to follow the articles on 1C Vietnam's website!

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