Accounting Fundamentals Certification (AFC) Practice Test

The revenues generated from selling goods or services are referred to as "Revenue" in accounting. Revenue represents the income earned by a company from its normal business operations, specifically from the sale of goods or services to customers. This figure is critical for assessing the overall financial performance of a business, as it forms the top line of the income statement.

Revenue is a key indicator of a company's ability to generate sales and ultimately contribute to profitability. It reflects the effectiveness of a company's sales strategy and market demand for its products or services. Unlike assets, which are resources owned by a company, or liabilities, which represent obligations owed to external parties, revenue directly reflects the operational success of a business within a specified period. Additionally, it is distinct from expenses, which are the costs incurred to generate revenue. Understanding revenue is essential for evaluating a business’s financial health and sustainability.