annualized revenue definition
What is revenue realization? When are revenues realized in in accrual accounting? Is the realization concept really necessary? Related Topics. For an introduction to accrual accounting, see Accrual Accounting. For more in-depth definition and explanation of revenues from sales, see Sales Revenues. Revenue Realization Defined and Explained. When a seller takes an order, or signs a sales contract with a business customer, the seller cannot claim sales revenues and accounts receivable until (1) the seller has good reason to believe the customer will actually pay and (2) the seller actually earns the revenues by delivering goods and services. Annualized income is usually calculated with less than one year's worth of data, so it is only an estimate of how much income will actually be earned for the year. An estimate of the amount of money that an individual, business or asset will earn over the course of a year. Annualized income is usually calculated with less than one year's worth of data, so it is only an estimate of how much income will actually be earned for the year. Indulge Your Inner Word Nerd. 1  Words of the Year: 1066. 2  Trending: NYT Op-Ed: The 'Skeeviness' of the 1990s Is Alive in 2017. 3  How to Pronounce the Trickiest Menu Items. 4  Trend Watch: Total Eclipse. 5  Words of the Year: 1066. 6  Trending: NYT Op-Ed: The 'Skeeviness' of the 1990s Is Alive in 2017. 7  How to Pronounce the Trickiest Menu Items. What is Revenue Realization? For companies that use accrual accounting, revenues from sales of goods and services are said to be realizable revenues by the seller only when there is good reason to believe the seller will receive payment. Nevertheless, the seller also classifies the same revenues initially as Unearned Revenues, an entry in a Liability account. As the customer uses the service, month by month, the seller will transfer funds from the Liability accountto the Revenue account Sales Revenues. See the article Unearned Revenues for more on the bookkeeping transactions and accounting reporting of unearned and unrealized revenues. What is 'Annualized Income' Annualized income is an estimate of the amount of money that an individual or a business generates over the course of a year. Annualized income is calculated with less than one year's worth of data, so it is only an estimate of total income for the year, and annualized income figures can be helpful for creating budgets and making estimated income tax payments. By contrast, for companies that use cash basis accounting, the realization concept simply does not apply. Under cash basis accounting, sellers claim sales revenues only when customers pay in cash. Sections below further define and explain realization in context with similar terms including the following. Assume a portfolio generates a 1% return in one month. The monthly rate can be annualized by multiplying 1% by 12 (because there are 12 months in one year) to produce a 12% annualized return. Note that this number is just an estimate of what the portfolio's return would be if its performance was exactly the same for 12 months. annualizing. 1  transitive verb. : 2  to calculate or adjust to reflect a rate based on a full year quarterly returns yielding at an annualized rate of seven percent.
Annualized income is an estimate of the amount of money that an individual or a business generates over the course of a year.