Answer to Question #182800 in Economics for hemangi

Question

Love Doddle is a gifting enterprise of Ms. Dorati. The enterprise generates inflows by arranging gift hampers for the customer's loved ones. The inflows arises from the sale of gift hampers Rs 505000 and from bank interest, dividend receipt Rs4200. Ms. Dorati is confused on how to record these inflows. She would like to understand from you about the concepts Revenue from operation and other income, so that she can record the information so as to prepare the profit and loss statement of the enterprise. Define, share examples, and elaborate on your understanding towards the terms Revenue from Operation and Other Income (10 Marks)

Answer 1

Operating profit is one of the sources of financing for the further activities of the enterprise and the guarantee of its prosperity. Operating profit is used to repay loans, if any, and do not forget about taxes. In short, operating income is subject to various adjustments. When all non-operating expenses are deducted from operating income, the entity remains in net income. It is from this profit that dividends are paid in most cases.

Revenue is, in part, an indicator of the utility of an enterprise to the economy. If the revenue grows, it means that the company is in demand. At the same time, revenue can grow both as a result of an increase in production volumes, and as a result of an increase in product prices. In any case, this means that the company's products are in demand. But if revenue falls for a significant amount of time, it's a bad sign. Revenue is practically the only source of funds for the existence of the company. In difficult times, an enterprise may resort to using borrowed funds, but it is obvious that it is impossible to constantly borrow.