Sikimin Bashi
Landline Should Go For Net Revenue The accounting issue at hand in this case is revenue. Landline is offering call routing services for PRU and the former entity has to make some receipts from the services rendered. To put the issue at hand in context, revenue is generally the income received by any company from selling goods or services. In abroad sense, revenue is the income received by any commercial institution for the goods sold or services rendered. It is basically the incoming receipts generated from the services offered or goods sold. It is the core parameter of consideration in the event of evaluating the company’s health. There are two classifications of revenue and the situation in which Landline is requires serious consideration as to whether to go for net revenue or gross revenue. To quickly recap on the two, gross revenue is the cash inflow generated by a company from the sale of goods after adjusting the production costs without any other deductions considered. Net revenue, on the other hand, is derived by deducting taxes and all other expenses from the gross revenue of that company. The relationship between Landline and PRU qualifies as a retail business and in retail, the income gotten from a company through sales after deducting maintenance expenses and commissions among other expenses is called net revenue. If the expenses of a company are in the form of commissions, refunds or depreciation, net revenue is found after deducting taxes as well. The gross revenue is significant to a company since it gives the company a rough idea about the sales volume of the entity but it does not clearly reflect the profitability of the company. However, it reflects the efficiency of utility of human resources. Net income is the profit generated by a business after making adjustments for taxation and all other expenses. It is certainly the most important of all the digits displayed in the financial report. Net income is often declared on a quarterly basis
Cited: Porter, Gary A. and Curtis L. Norton. Using Financial Accounting Information: The Alternative to Debits and Credits. Cengage Learning, 2012.Print