Answer to Question #178861 in Financial Math for AMIT VIKAS MALKAR

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

Answer 1

·        Shares

It is having or owing a portion of something with others for example owing a portion of a company

It can also be defined as a unit of ownership which represent an equal proportion of company’s capital.

Examples of shares include;

1.      Ordinary shares- this is the most common type of stock that a company issues to raise capital, the holders of shares enjoy voting right, can attend general meeting and are can also share in company’s profit

2.      Preference shares- shareholders have the priority to receive dividends and also return of capital in case of liquidation.

·        Revenue from operation.

It’s popularly referred to as operating revenue; this is the revenue that a company generates from primarily business. For example if Love Doddle core business is gift hampers, any income generated in relation to gift hampers should be considered as operating revenue

Revenue –is total income a business generates from sale of goods or services.

Revenue is a key component in determining profit or loss of an entity.

·        Other Income

This is income generated from activities that are not direct related to the main focus of business, examples include; interest income, gain from disposal of assets, foreign exchange gains.

Other income is added to net profit to compute net profit before income tax.