The term “revenue” is a measure of the financial impact on a company resulting from a particular process. This process is a sale. A customer enters a Safeway grocery store and pays $20 to purchase items, such as cookies, toothpaste, lettuce, and milk. The company receives an asset, possibly a $20 bill. This $20 asset inflow into the company results from a sale and is called revenue. Revenue is not an asset; it is a measure of the increase in the company’s net assets [4]that results from sales of inventory and services. As will be discussed in more detail in , for reporting purposes, these sales must result from the primary or central operation of the business. Thus, for Company, revenues are derived from the sale of soft drinks. Sales resulting from noncentral parts of the company’s operations (perhaps the disposal of a piece of land, for example) will be reported in a different manner.
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Throughout each day of the year, Yafeway makes sales to customers and accepts cash, checks, or credit card payments. The reported revenue figure is merely a total of all sales made during the period, clearly relevant information to any decision maker attempting to determine the financial prospects of this company. During 2008, the multitude of Safeway stores located both inside and outside the United States sold inventory and received over $44 billion in assets in exchange. That is the information communicated by the reported revenue balance. To reiterate, this figure is not exact, precise, accurate, or correct. However, according to the company, it is a fairly presented total determined according to the rules of U.S. so that it contains no material misstatement. Any outside party analyzing Safeway should be able to rely on this number with confidence in making possible decisions about the company as a whole.
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