Answer to Question #189009 in Management for Asim Mandal

Question

2. 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

Answer 1

Revenue from the operation is the cash inflow from the core business operations. The earnings Ms Dorati makes from the gift enterprise represent this. In order to gauge the business’s true performance and financial position, the income should be recorded separately from the interest the money accrues while in the bank as well as the dividends she receives from other external sources. Income statements are used to measure the business revenues and expenses over a specified period. This enables business owners to determine whether they are making profits or losses. Profit and loss statements are prepared by subtracting the total operational and production costs from the total revenue yielded primarily from the sale of products or services.