ements

atement of Comprehensive Incom

Revenue is the amount of money that a company actually
receives during a specific period, including discounts and
deductions for returned merchandise. It is the "top line" or
"gross income" figure from which costs are subtracted to
determine net income.
Service Income Account is generally used to describe revenue
derived from rendering of services.

Service Revenue pertains to income earned from rendering

services (intangible products). It is the main revenue account
of service-type businesses.
Recall that revenue from services is recognized when
they have already been rendered. However, contract of
services may take a long time to complete.

For example, when you enrolled in high school

sometime in May or June, you initially signed for a
service contract for one school-year ( June to March).
The Revenue generated from this enrolment contract
may be reported as Tuition Fee Revenue. If the school
follows the calendar year reporting, then we will have a
problem because of the misaligned time period. Your
enrolment period in the SCI is for services rendered to
students from January to December of the current year.
How do we solve the problem of
misaligned time period?
Accountants use the percentage of completion to allocate
revenue to the appropriate period. It is generally assumed that
services are rendered evenly throughout the contract
period.

on fe e for o n e sc h o o l year is
For example, tuiti o l y e a r is e q uiva lent
ne s c h o
P50,000 per student. O en T u iti on fee
M a rch ). T h
10 months (June to P 3 5,0 00
to D e c em b e r is
revenue June
0/10 mo n th s* 7 m o n ths).
(P50,00
 Example: Tuition Fee Revenue

Twinkle-Twinkle Pre-School collected tuition

fee of ₱1,250,000 and ₱1,455,000 for the
school years 20X1-20X2 and 20X2-20X3,
respectively. The school closed in April and
May. Determine the tuition fee revenue to be
reported on SCI for the calendar year 20X2.
 Example: Tuition Fee Revenue

Twinkle-twinkle Pre- School collected tuition fee of P1,250,000 and P 1,455,000 for
the School year 20x1-20x2,respectively. The school closed in April and May.
Determine the Tuition fee revenue to be reported on SCI for the calendar year 20x2.
Sales Revenue account generally used to describe
revenue derived from selling of goods. A more specific
account name may be used to identify the goods sold
such as Office Supplies, Sales, Food Sales, etc.
 Revenue from Sales of goods is recognized
when goods have been delivered. However,
customers are allowed to return goods that do not
meet their quality standards. Recall that we already
counted the goods delivered as Sales on the date of
delivery. When goods are returned, it is not
deducted from Sales. Rather, normal accounting
practice is to report it under the account name Sales
Return and Allowances – a Contra Sales account.
 In our Chapter 1,discussion of Accounts Payable, we
mentioned that suppliers give discounts to their customers
to encourage early payments. Let us revisit that discussion
from the supplier’s point of view. We delivered the goods to
the buyer and appropriately recorded Sales Revenue based
on full selling price. We gave the buyer the credit terms of
2/10, n/30. The customer took advantage of the discount
and paid within ten day discount period. Accounting
practice does not deduct the discount from Sales Revenue.
Rather, we use another Contra-Sales account called Sales
Discount.
Only Net Sales is reported on the face of the SCI.
Net Sales refer to Gross Sales less Sales Return
and Allowances and Sales Discount. (Net Sales =
Gross Sales – Sales Return and Allowances –
Sales Discount)
 Friendly Convenience Store:
Sales Revenue

Juana Dela Cruz, owner of Friendly Convenience Store, sold

3 boxes of ballpoint pens to Mrs. Susan Gonzales on account at
a price of ₱150 per box or ₱15 per pen. Juana gave Mrs.
Gonzales two weeks to pay the accout. Moreover, Juana told
Mrs. Gonzales that she will deduct 2% discount if she pays
within a week.
Mrs. Gonzales returned one week later. She returned five
pens and took advantage of the discount.
Determine the amount of Sales, Sales Return, Sales Discount
and Net Sales from the transaction with Mrs. Gonzales.
 Answer
Sales 150 x 3 ₱450.00
Sales Return 15 x 5 (75.00)
Amount to be paid by Mrs. Gonzales before 375.00
discount
Sales Discount (375x2%) 2% (7.50)
Amount paid by Mrs. Gonzales ₱367.50

Alternatively:

Sales ₱450.00
Less: Sales Returns and Allowances (75.00)
Less: Sales Discount (7.50)
Net Sales ₱367.50