Question

Distinguish between Revenues and Estimated Revenue. Illustrate the budget entry for Estimated Revenue. Use this information to book the entry. The city approved the revenue budget for the following. Total Revenue $750,000 (Taxes $500,000 Inter government Revenue $125,000, and Licenses and permits of $125,000).

Answer 1

Revenue is the total amount of income generated by the sale of goods or services related to the company's primary operations. It is the amount earned before deducting cost of goods sold and other operating and fixed expenses of the company. It is often referred to as the top line because it sits at the top of the income statement. When we say a company has "top-line growth," it implies that the company is experiencing an increase in gross sales or revenue.

Estimated revenue refers to the revenue projected to accrue during an accounting period, whether or not all of it is to be collected during that period. In cash basis accounting it signifies the amount projected to be collected during an accounting period. It refers to the revenue projected from various major sources of the company including primary operations and other incidental operations.

Journal entry for estimated budget

                     Account titles                                                  Debit Credit

          Estimated revenues – taxes                                        500,000

          Estimated revenues- Inter government revenue         125,000

          Estimated revenues- Licenses and permits                125,000

                     To appropriations- various expenditures                              750,000

( to record the estimated revenue)

Journal entry is prepared assuming that the revenue and expenditures are same since the details of expenditure are not available. If estimated revenue is higher than the appropriations, then we would be left with fund balance.