Question

During January 2018, the first month of operations, a consulting firm had following transactions: Issued common stock to owners in exchange for $20,000 cash. Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note for $4,000. Received $9,000 in cash for consulting services performed in January. Purchased $1,500 of supplies on account; all of the supplies were used in January. Provided consulting services on account in the amount of $16,000. Paid $750 on account. Paid $3,000 to employees for work performed during January. Received a bill for utilities for January of $3,400; the bill remains unpaid. What is the amount of total revenue to be reported on the income statement for the month of January?

Answer 1

The total or gross revenue for this company on the income statement would be the sum of:

• $9,000 received in cash for consulting services performed in January
• $16,000 worth of consulting services that will be paid on account.

So the total revenue will be $25,000.

This is because revenue is different from cash: as long as the sales are made, they are counted as revenue even if they are on account, and no cash payment has been made.