Revenue
Income earned from the sale of goods or services in the ordinary course of business — the top line of the income statement.
The exam loves to test the moment of recognition over the timing of cash. The classic stem describes cash received before delivery (a magazine subscription, an upfront annual fee) and asks how much revenue hits the period — the answer is the portion earned, with the remainder sitting as deferred (unearned) revenue, a liability (current if it will be earned within a year). A second favorite is gross vs. net presentation: an agent who never takes control of the goods records only the commission (net), while a principal records the full sales price (gross) — getting this wrong inflates the top line and gross margin without touching net income. Watch for “channel stuffing,” bill-and-hold, and aggressive estimates of variable consideration as the manipulation tells.
Don’t confuse revenue with the broader accruals concept — a receivable is revenue already recognized awaiting cash, whereas deferred revenue is cash already collected awaiting recognition. And separate revenue (a top-line inflow) from expenses matched against it; the trap is assuming higher revenue means higher-quality earnings when accruals are quietly rising (a high accruals ratio signals less persistent, lower-quality earnings).
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