How to Increase a Revenue Account in Accounting
A company generates revenue as a result of operating and non-operating activities. Revenues generated as a result of operating activities include sales, while non-operating revenue includes items like interest revenue. A revenue or sales account has a normal credit balance. This means crediting revenue increases the revenue on a company's books. Revenue is decreased by a debit entry. Revenue is found on a company's income statement and increases a shareholder's equity in the business.
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Instructions
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Review the details of the sales transaction. A company can sell goods and services in exchange for cash or a company can sell goods and services on credit. Review the sales invoice associated with the transaction. Observe the date of the transaction and the amount of the sale. The sales invoice provides information that will be used to journalize the revenue transaction.
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Record the date of the sales transaction. Copy the date of the sale from the sales invoice. Record when the sale occurs as opposed to when the company receives cash. Companies have a requirement to recognize revenue in the period earned as opposed to when cash is paid.
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Write a debit entry for cash. Debit cash if the company receives cash in exchange for goods and services. A debit to cash illustrates an increase in the company's cash account. Debit accounts receivable if the company allows the purchase of goods and services on credit. A debit to the accounts receivable account increases the amount of money a company can expect to receive within a one year period. Use the amount listed on the sales invoice to debit cash or accounts receivable for the appropriate amount.
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Draft a credit entry in the company's revenue account. A company may credit sales, fees earned or sales revenue to indicate the company generated money from selling goods and services. Refer to the sales receipt to locate the amount of the sale. For example, if the sales receipt shows a company made a $400 sale, the company must credit revenue for $400. In this scenario, crediting revenue increases the amount in a company's revenue account by $400.
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Tips & Warnings
Remember, credits and debits must balance. This means if a company credits revenue for $500, a matching $500 debit to cash or accounts receivable must accompany the credit entry. This shows an increase in a company's revenue account and an increase in accounts receivable or cash.
