Lesson 8: Revenue/Income - Value Generating Activities
In the previous lesson, we discovered that profit is the third source of funds to the business. It is calculated as Revenue earned LESS Expenses incurred = Profit for the period. Note that it is 'revenue earned', rather than 'received'.
Revenue is an activity which generates value (increases assets or reduces liabilities) to the benefit of the business owner.
In the following video, we walk you through an explanation of Income.
Note1: In the video, Peter mentions an 'account receivable'. This is just another term for 'debtor' - a customer who owes us money for goods or services we provided.
Note2: Throughout most of the world, the terms Income and Revenue are synonymous. However, in the US and parts of Canada, Income is often used as a synonym for Profit (it would be more accurate to use Net Income in that case).
[Duration 4:04]
Revenue is an activity which generates value (increases assets or reduces liabilities) to the benefit of the business owner.
In the following video, we walk you through an explanation of Income.
Note1: In the video, Peter mentions an 'account receivable'. This is just another term for 'debtor' - a customer who owes us money for goods or services we provided.
Note2: Throughout most of the world, the terms Income and Revenue are synonymous. However, in the US and parts of Canada, Income is often used as a synonym for Profit (it would be more accurate to use Net Income in that case).
[Duration 4:04]
Extenders
- Is it better for tips to be considered mandatory (ie. The employee gets very little guaranteed wages, the rest is from tips) or for the employees to be paid a higher base wage and not depend so much on tips?
- In the example shown in your Workbook on page 41, the expense was incurred because the customer ‘eats up the meal’. What would the impact be if some of the stock of food (say, fresh meat) went bad and had to be thrown away before it could be sold? Use the BaSIS Framework to explain your reasoning.
- Continuing with #2, what is the impact on the business if the meal cost the business more than R100 to prepare and serve? Explain using the BaSIS Framework.