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Example 1: Turnover/revenue versus other income
An entity who is in the business of buying and selling goods, would classify that income in the turnover line of the financial statements. If that same entity also generates income from the rental of investment properties which is incidental to its main trade, this would not be shown within turnover/revenue instead it would be disclosed as other income on the face of the profit and loss and an explanation provided in the notes where material detailing that it is rental income.
The same would be the case if that entity had some income from the dividends on investments, this would not be shown in the turnover line.
Example 2: Turnover/revenue versus other income
If we take another entity whose business involves the purchase of land and development of properties on this land which includes in certain instances the holding of some of these properties for future rental as investment properties. In this case the sale of the land and properties to third parties would be shown as revenue. In addition, the rental income would be classified as revenue/turnover as this is also part of its business. A note would be required to show the split of income in the financial statements.
Example 3: Turnover/revenue versus other income
Company A is involved in the holdings of investments. In this case dividend income, gains on sale of shares would be shown in revenue in the profit and loss account.
Revenue recognition rules are dependent on when the risks and reward of ownership transfer. This is discussed further in Section 23.
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