An important concept to understand is the difference between a sale, and the revenue generated by that sale. Whilst the Sales report will show all sales that occurred on a particular day, the Revenue report is designed to give you an overview of how much of those sales represent Revenue from an accounting perspective.
The main point to keep in mind is the treatment of Voucher and Course sales. When you sell a Voucher to a client you are creating a future obligation to provide services or goods at a future date. The sale of the Voucher will reflect in your daily Sales report for the value the voucher was sold at.
In the future, when the Client redeems this voucher for a service the sale of the Service will also show on your Sales report. To avoid counting this sale twice, the Revenue report provides an alternative method for viewing actual Revenue earned over a period.
The Revenue report gives you an overview of this by allowing you to calculate what revenue you generated based on IAS and IFRS guidelines. This states that the sale of vouchers or courses should only reflect as revenue when they are redeemed.
When you tick the Calculate Accounting Revenue option, revenue is calculated by taking total sales, less tax, less voucher and course sales, plus any course redemptions. Voucher redemptions are not explicitly added back as they would already be included in the total sales figures.
Because different business owners refer to the concept of revenue differently, the Revenue report also gives the option to be run without ticking the Calculate Accounting Revenue option. When the report is run like this, revenue is simply calculated as total sales less any used vouchers. Running the report like this is useful if you want an idea of what you earned for a given day, regardless of what future obligations have been created.
Summary of calculations:
- Calculate Accounting Revenue Ticked: Total Sales - Tax - Vouchers Sold - Courses Sold + Courses Redeemed.
- Unticked: Total Sales - Vouchers Redeemed
VAT on Vouchers and Courses
A final point to consider is the requirement to account for VAT on Vouchers and Courses. In general, the sale of a Voucher should not include any VAT. Instead, VAT will be collected on the Service that a client comes in for and utilizes the Voucher to pay for. So the sale of the Voucher will be zero-rated, and the service sale would be standard rated.
Courses are normally treated slightly differently, in that VAT is due on the sale of the Course - as it's for a known service. In this case, VAT is accounted for on the sale of the Course. When a client redeems a Course in ChiDesk, you will notice that the sale takes place at R0 and has no VAT effect.
- Note that this is how we have interpreted the most common treatment of Revenue and VAT and that you should check with your accountant in terms of how they would like to treat revenue and VAT from an accounting perspective.