What are Revenues?

Revenues are the fees generated from the sale of goods and services, and are recognized when the seller’s earnings process has been completed. Under the cash basis of accounting, revenues are recorded when cash is received from a customer in payment of these items. Under the accrual basis of accounting, revenues are recorded when goods and services are delivered to customers.

What are Receipts?

Receipts are the cash payments made by customers in exchange for a seller’s provision to them of goods and services. The concept is most commonly used under the cash basis of accounting, when the seller only records revenue when the related cash payments have been received from customers.

Comparing Revenues and Receipts

There are two main differences between revenues and receipts, which are as follows:

Recordation location. Revenues are reported as sales on the income statement, while receipts increase the cash total on the balance sheet.
Recordation timing. Revenues are earned when goods are sold or services are provided; at this point, an invoice is issued to the customer for payment, after which the seller receives payment from the customer (the “receipt”). Thus, an additional difference is really just a matter of timing, where the revenue is recorded first, and the receipt is recorded later, when the customer pays.

Example of Revenues and Receipts

A food provider sells a crate of mushrooms to a restaurant for $300, under 10-day payment terms. As soon as the mushrooms are delivered, the food provider can record revenues of $300 and an account receivable in the same amount. Ten days later, the restaurant pays the bill in full, resulting in a $300 receipt, which is recorded as an increase in cash and a reduction of the account receivable.

Receipts That Are Not Revenues

There are a number of cases in which a company can experience receipts that are not related to revenues. For example, it could receive cash from a lender when it enters into a lending arrangement. Or, it could sell an asset for cash. Another possibility is that the firm sells shares in the business to an investor in exchange for cash. In short, receipts can relate to more transactions than just those associated with revenues.