Commercial entities strive to maximize their revenue, because the higher and better the revenue, the better the chances of entity’s profitability and its overall success in business. A revenue is essentially any inflow for a business entity. While business operations should be the core source of revenue generation for any profitable business, revenue can actually also be earned from several other non-operational sources. Such revenue is also important as it can boost overall profitability and generate value for stakeholders.

This article looks at meaning of and differences between two categorizations of revenue based on the periodicity of their earnings – recurring and non-recurring revenues.

Definitions and meanings

Recurring revenues:

Recurring revenues are the inflows that a company generates from its routine business operations and that are expected to continue on a periodic basis in the future as well. They can be generated from both core/direct sources or from ancillary/indirect sources, so long as they are earned periodically. Recurring revenues are typically generated from the following sources:

  • From core sources: These include sale of manufactured or traded goods to regular or repeat customers, after sales services for sale of such goods and sale of services via subscription revenue models etc. A manufacturing entity, for example, effects regular sales of its goods through its distribution network. Likewise, an internet service provider has regular customers who mostly avail of its services on a subscription model. These revenues qualify as routine or recurring revenues.
  • From ancillary sources: These include other incomes and revenues like interest and rental incomes which are received periodically on investments and properties etc.

Recurring revenues are generally reported in trading account as they are typically earned from the core revenue generating activities of the entity. In case of ancillary investment incomes that are earned on a periodical basis, they will be recorded in the profit and loss account. Such revenues assume considerable importance as the commercial entities heavily rely on them for survival.

Non-recurring revenues:

Non-recurring revenues are one-off incomes or gains that arise from infrequent events and are not expected to continue in the future.

Several type of non-repetitive events can lead to earning of non-recurring revenues. These can include:

  • Infrequent or extraordinary events: Examples of infrequent or extraordinary events include profit on land acquired under government projects, profit on sale of business assets, profit on sale of division or subsidiary, windfall gain from bumper crop and income received from favorable litigation etc.
  • Changes in accounting policies or rules: The changes in accounting policies or rules often necessitate adjustment entries in the books which may result in a notional non-recurring revenue. For example, restatement of fixed assets at fair market value (FMV) over historical value may result in crediting of income on restatement.

Non-recurring revenues are thus typically expected to be a once in a lifetime occurrence for a business. For example, Abraham Inc., a manufacturing entity, owns a 100 acre agricultural land. The government has acquired this land to facilitate a new highway project and compensated Abraham Inc. by payment of $2 million. This compensation for land acquired becomes a non-recurring revenue for Abraham Inc.

These revenues are most likely to arise from non-routine business operations but certain incomes such as windfall gains from a contract and additional bonus awarded under a contract etc. which are non-recurring in nature may in fact arise from routine business operation itself.

A non-recurring revenue is further categorized as capital income or revenue income based on its nature and accordingly reported either in balance sheet or in profit and loss account.

Difference between recurring and non-recurring revenues

The nine key points of difference between recurring and non-recurring revenues have been listed below:

1. Meaning

  • Recurring revenues are incomes that are earned frequently and that arise from routine day to day business operations of an entity.
  • Non-recurring revenues are incomes that are infrequent or ‘one-off’ in nature and may or may not arise from business events.

2. Frequency

  • Recurring revenues are earned periodically and can be daily, weekly or on a month-on-month basis. For example, subscription income for a magazine publication is earned periodically.
  • Non-recurring revenues are not periodic i.e., they are earned as and when the triggering event takes place. Infact, these incomes are often ‘once in a lifetime’ for a business.

3. Necessity

  • It is imperative that a business earn recurring revenues. Without earning recurring revenues, the business will not be able to meet its operational expenses. Thus, recurring revenues are essential for viability and continuity of a business of any form.
  • Non-recurring revenues do not generally impact survival of the entity but may work as a bonus to help the entity earn windfall profits.

4. Source

  • Recurring revenues generally accrue from business activities of the entity. These may be operational in nature such as recurring business income or non-operational in nature such as investment income.
  • Non-recurring revenues generally accrue from non-operational activities.

5. Nature

  • Recurring revenues are earned periodically from regular business sources and thus tend to be revenue in nature.
  • Non-recurring revenues can be either revenue or capital in nature – windfall gain in business can be revenue income but gains from sale of a property will be capital income.

6. Predictability

  • Recurring revenues arise from known business sources and thus tend to be relatively predictable in nature.
  • Non-recurring revenues are comparatively unpredictable in nature as they often arise due to circumstances beyond the control of the entity.

7. Financial reporting

  • Recurring revenues of the same type are aggregated and credited either to the trading or profit and loss based on whether they are earned from core business activities or from other ancillary sources.
  • Non-recurring revenues are first identified as being revenue or capital in nature following which they may either be credited to the profit and loss account or to a balance sheet account. In either case, non-recurring revenues are carved out and reported as a separate line item. Furthermore, a note explaining the source of such income may also be separately made in the notes forming part of the financial statements, if required.

8. Examples

  • Examples of recurring revenues include regular sale of goods to distributors, after sales service contract income, subscription income, periodic interest income etc.
  • Examples of non-recurring revenues include award in favorable legal suit, income from sale of capital asset or from compulsory acquisition by the government etc.


Recurring revenues are like the fuel of the business, keeping it going each day. If an entity cannot generate sufficient recurring revenues, its expenses will pile up leading to losses which may eventually lead to bankruptcy and shutdown of the business. Thus, management attention is always focused on maintaining or increasing recurring revenues for the entity. This is also why separate reporting is required for both recurring and non-recurring revenues.

Companies may sometimes be profitable in a year not due to high recurring revenues but solely on account of a windfall profit. The profitability which is solely on account of non-recurring revenues can be a cause of concern for both management and stakeholders. This necessitates adequate segregation and reporting of revenues so as not to present a skewed financial position to stakeholders.