Definition of RA in Accounts

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RA stands for "revenue account" from an accounting perspective in business. This term is used by most businesses in the United States, while in the UK the more common term is profit and loss account. Either way, this account is designed to be one of the primary accounts of any business, tracking the sales and expenses of the business as they occur.

Accounts Definition

A business account is simply a financial account that is used to store funds from a certain source and pay certain types of expenses. These accounts are almost always created with banks that support businesses and are used for a wide variety of purposes. Accounts should not be confused with the theoretical accounting tables that businesses also use to keep track of revenue.

Revenue Accounts

RAs or revenue accounts are designed to hold the revenue that businesses create when they successfully complete transactions. In their most simple form, when a business creates money from a sale, the revenue account is used to safely deposit that money. This may occur with a physical or electronic check. Revenue accounts are also used to pay out primary business expenses, such as the costs of supplies and inventory.

Necessity

Revenue accounts are important from an accounting perspective because they give businesses the ability to track precisely how much revenue they have actually received versus expected revenue, making it easier to manage accounts receivable and check banking records against their own. Revenue accounts also give businesses the ability to access large amounts of cash at once.

Alternatives

Revenue accounts are not the only accounts businesses use to keep track of profits and expenses. Many businesses place money in a central revenue account and then distribute it to many accounts. Some may have different accounts for different departments. Others may use a separate account to pay employees or use other accounts to channel investor money.

Contra Account

A contra RA or contra revenue account is an account set up in opposition to the revenue account to keep track of losses. These accounts typically receive money from returns or discounts that the business gives, which are transferred from the RA to the contra account to show a loss.

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