Net revenue is the revenue a company earns in a given period after any purchaser discounts or allowances are factored.
Many businesses use purchase discounts to encourage customers to buy their products or services, especially in the retail and wholesale sectors.
In addition, they use purchase allowances to encourage buyers (who purchase on credit) to pay their balances sooner—for example, they receive a 2% discount for paying a bill in 10 days instead of 30.
When a company provides a discount or an allowance to a customer it appears on a company’s income statement as a reduction to revenue. This means the net revenue figure is the “true” revenue for the specified period.
More about net revenue
The excerpt below shows how net revenue appears on the income statement of a retail or wholesale company. In this case, ABC Co. sells 10,000 units of its product at $10 each, with a 10% purchase discount and a 2% purchase allowance for customers.
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