How Revenue Affects the Balance Sheet

The top of the income statement is usually reserved for revenue. It does, however, have an effect on the bottom line.

Affect on Funds

A company’s cash-only payment conditions produce a commensurate amount of cash on the balance sheet.

It has a negative effect on the accounts receivable

Accounts receivable are created on the balance sheet if the payment conditions enable clients to use credit. It is also possible that an asset on the balance sheet may grow if the sale is being made in return for another asset (such as in a barter transaction).

It has an effect on the equity of the shareholders

The shareholders’ equity portion of the balance sheet will likewise expand as a result of this increase in assets. When revenue is brought in, it influences the company’s balance sheet by increasing the asset account and the equity account.

Click Here For More Articles

Leave a Comment