'Revenue Accounting' in the Age of E-Commerce: A Framework for Conceptual, Analytical, and Exchange Rate Considerations

41 Pages Posted: 25 Apr 2002

See all articles by Jonathan C. Glover

Jonathan C. Glover

Columbia Business School

Yuji Ijiri

Carnegie Mellon University


This paper explores "revenue accounting" in contrast to traditional "cost accounting". Revenue accounting serves the information needs of managers and investors in planning and controlling a firm's sales activities and their financial consequences, especially in the age of e-commerce. Weaknesses of traditional accounting have become particularly evident recently, for example, the lack of 1) revenue mileposts, 2) revenue sustainability measurements, and 3) intangibles capitalization. The paper emphasizes the need to develop a conceptual framework of revenue accounting and, as a tentative measure, proposes five basic postulates and five operational postulates of revenue accounting. On the side of analytical frameworks, the paper explores some tentative remedies for the weaknesses. Several revenue mileposts are explored to gauge progress in earning revenues and a Markov process is applied to an example involving mileposts. Revenue momentum, measured by the exponential smoothing method, is examined as a way of getting feedback on revenue sustainability; and the use of the sustainability concept in the analysis of "fixed and variable revenues" is illustrated. A project-oriented approach in a manner similar to capital budgeting and to Reserve Recognition Accounting is proposed by treating each customer as a project. Standardization of forecasts are also considered as an important way of bypassing the capitalization issue. Finally, while e-commerce is inherently global, issues specific to global operations are highlighted, namely, exchange rate issues when venture capitalists and the start-up company use different currencies producing different rates of return on the same project.

JEL Classification: M41

Suggested Citation

Glover, Jonathan C. and Ijiri, Yuji, 'Revenue Accounting' in the Age of E-Commerce: A Framework for Conceptual, Analytical, and Exchange Rate Considerations. Available at SSRN: https://ssrn.com/abstract=309141

Jonathan C. Glover (Contact Author)

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States
212-854-1911 (Phone)

Yuji Ijiri

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States
412-268-2303 (Phone)

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