Answer to Question #185081 in Financial Math for Nachiket Pawar

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

Revenue from operations is defined as the income generated by an entity from its daily core business operations. If the entity is able to generate a steady flow of income from its operations, it is said to have been running successfully.

Other income is the part of income which is not generated from main business operations but generated out of other sources such as bank interest, sale of business property, rent earned from business premises.

For example

Shraddha automobile co makes and sells automobiles as their core business, so their revenue from operations is said to be generated by the selling of automobiles only.

Revenue from operations is calculated by taking in to account of figure of "sales” after factoring in any sales return or discount allowed.

After calculating net operating income from the above step deduct the "cost of operations” to derive the operating profits of a company. The same can be explained with the help a simple illustration.

Illustration-the operating profit of Shraddha automobile co for the period 31 march 2021 is calculated as follows-

Shraddha automobile co generating operating profit by selling automobile which is referred as revenue from main business operations and by selling scrap auto vehicles and earning by providing after sale services referred as other income .

 so in Ms. Dorati she is generating revenue by selling gift hampers that can be referred as revenue from operations and bank interest &dividend can be referred as her other source of income.