Why are revenues negative in accounting

Now, as a result of ever more elaborate new accounting standards and complex corporate structures, the top line can be just as bewildering. A case in point: Halifax-based Bell Aliant Inc. How can a utility with more than three million customers paying for phone, Internet and TV service report proceeds of less than zero?

Yet explain it she does, cheerfully and thoroughly. Like many other companies, Bell Aliant had two major financial reporting hurdles to clear this past Jan. On an operating basis, Bell Aliant had a solid BCE Inc. Technically, it was a handful of operating entities, with Bell Aliant Regional Communications Income Fund at the top of its corporate organization chart.

In the examples above we looked at the Cash checking account and a Loan account. You many have noticed that the Cash account and most other asset accounts normally maintain a positive balance. Accounts that normally maintain a positive balance typically receive debits. And they are called positive accounts or Debit accounts. Likewise, a Loan account and other liability accounts normally maintain a negative balance. Accounts that normally maintain a negative balance usually receive just credits.

They accounts are called negative accounts or Credit accounts. When we discuss our company's account balances, we ignore whether the actual balance in the underlying accounting system is positive or negative. We just discuss the number portion without the sign.

When the accounting software prints the Balance Sheet and Profit and Loss reports, it also ignores the sign. To fully understand how to record bookkeeping transactions, we must understand that all of our accounts fit into one of 5 categories. The account categories are:. Because Asset and Expense accounts maintain positive balances, they are positive, or debit accounts.

Look at the number line. If you add a positive number debit to a positive number, you get a bigger positive number. But if you start with a positive number and add a negative number credit , you get a smaller positive number you move left on the number line. The asset account called Cash, or the checking account, is unique in that it routinely receives debits and credits, but its goal is to maintain a positive balance!

Liability, Equity, and Revenue accounts usually receive credits, so they maintain negative balances. They are called credit accounts. In terms of real estate investments, revenue refers to the income generated by a property, such as rent or parking fees. When the operating expenses incurred in running the property are subtracted from property income, the resulting value is net operating income NOI.

Revenue is the money a company earns from the sale of its products and services. Cash flow is the net amount of cash being transferred into and out of a company. Revenue provides a measure of the effectiveness of a company's sales and marketing, whereas cash flow is more of a liquidity indicator. Both revenue and cash flow should be analyzed together for a comprehensive review of a company's financial health.

For many companies, revenues are generated from the sales of products or services. For this reason, revenue is sometimes known as gross sales. Revenue can also be earned via other sources. Inventors or entertainers may receive revenue from licensing, patents, or royalties. Real estate investors might earn revenue from rental income.

Revenue for federal and local governments would likely be in the form of tax receipts from property or income taxes. Governments might also earn revenue from the sale of an asset or interest income from a bond. Charities and non-profit organizations usually receive income from donations and grants. Universities could earn revenue from charging tuition but also from investment gains on their endowment fund. Accrued revenue is the revenue earned by a company for the delivery of goods or services that have yet to be paid by the customer.

In accrual accounting, revenue is reported at the time a sales transaction takes place and may not necessarily represent cash in hand. Deferred, or unearned revenue can be thought of as the opposite of accrued revenue, in that unearned revenue accounts for money prepaid by a customer for goods or services that have yet to be delivered.

If a company has received prepayment for its goods, it would recognize the revenue as unearned, but would not recognize the revenue on its income statement until the period for which the goods or services were delivered.

A company has a cost to produce goods sold, as well as other fixed costs and obligations like taxes and interest payments due on loans. As a result, if total costs exceed revenues, a company will have a negative profit even though it may be bringing in a lot of money from sales. Financial Analysis. Tools for Fundamental Analysis. Financial Statements.

Your Privacy Rights. To change or withdraw your consent choices for Investopedia. The company may have negative taxable income and receive tax refunds from the tax authority as a result. For example, if a company has positive income in one year and negative income in the next year, the company can use its negative income to offset its positive income. This reduces the amount of its taxable income and, therefore, reduces its tax liability. Edriaan Koening began writing professionally in , while studying toward her Bachelor of Arts in media and communications at the University of Melbourne.

She has since written for several magazines and websites.