Which item should be reported as revenue in the income statement?

Which item should be reported as revenue in the income statement?

• A. Amount earned from customers for the sale of goods
• B. Interest earned on investments
• C. Capital contributed by owners
• D. Dividends received

Answer: (A)

Revenue is the inflow from the primary operating activity—selling goods or providing services to customers. The amount earned from customers for the sale of goods is the item that fits this definition, so it belongs on the income statement as revenue. The other items are not revenue: interest earned on investments is investment income, capital contributed by owners increases equity rather than revenue, and dividends received are distributions from investments and appear as investment income rather than revenue.

Revenue is the inflow from the primary operating activity—selling goods or providing services to customers. The amount earned from customers for the sale of goods is the item that fits this definition, so it belongs on the income statement as revenue. The other items are not revenue: interest earned on investments is investment income, capital contributed by owners increases equity rather than revenue, and dividends received are distributions from investments and appear as investment income rather than revenue.