What Is a Net Receipt?
A net receipt is the amount of revenue received minus any deductions for customer returns, sale discounts, rebates, or promotional offers. It can sometimes be referred to as the net profit of a business or the net royalty payment that an author, musician, or actor receives from the sale of his creative work. In the case of royalty payments, an artist usually receives a percentage of net sales that is determined by the publisher, production company, or record label.
The business world often considers a net receipt to be the amount of gross revenue that is left after accounting for product defects, returns, promotional allowances, and product that is unable to be sold. For example, the food industry will usually have to pull both expired and damaged product from its factories and retail shelf locations. This entire amount of product is deducted from the amount of revenue that a company receives. Deductions may not take place in the same time period in which the merchandise was sold.
When companies account for the sale of goods, they will usually record the full sale price as gross revenue. The customers who purchase the goods may not pay the full price. They may be given volume discounts, sale item discounts, or payment term discounts. This is what is referred to as allowances.
Since the amount of returns and allowances can vary, most companies account for them as they occur. A net receipt for a certain time period shows the amount of full revenue received as well as the amount of returns and allowances that occurred during the same period. The net revenue that is recorded for that period is what is left over after the amount of sales and allowances have been subtracted from the amount of full revenue.
Most artists receive a net receipt payment on the sale of their creative work. For example, an author who writes a book and signs a contract with a publishing company authorizes the publisher to handle the production, marketing, and distribution of the book. The publishing company sets a certain unit selling price and keeps track of the amount of revenue the book generates. Any discounts and returns are also tracked by the publishing company, which reduces the amount of the book's revenue.
An author is then paid a net receipt of that revenue per his publishing contract. It will usually not be for the full amount of net revenue that the publishing company received. This is because the company incurs costs and risks to publish, market and distribute it. Since the publisher would not have generated revenue without the author's work, it shares that net revenue with him.
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