The net sales total is the most precise figure for the sales that your firm generates. Sales generate revenue. Revenue is defined as the amount of money a business receives in a period. Most of the revenue generated by a business is from selling a product or service. [1] X Research source Your company can also generate revenue from non-sales activities, such as selling a building or a piece of machinery.
You can recognize revenue from sales when you send an invoice to the client, or when you physically deliver the product. Every company has a policy for recognizing sales revenue. This accounting method matches revenue with expenses. It is a better indicator of company profit than the cash method of accounting. The cash method recognizes revenue when cash is received. Expenses are posted when cash is paid. Only publicly traded companies are required to use the Generally Accepted Accounting Principles (GAAP) accrual method of accounting. Many smaller, private companies prefer the simplicity of the cash method.
