What Is Takings in Accounting?

Takings is the amount of sales realized by a business. This figure is also known as the “top line,” as it is found on the very first line of a typical corporate income statement.

Definition

The term “takings,” referring to the net sales of a corporation, is usually used for retail stores. The word comes from the idea of “taking in” cash for merchandise sold over a specific period of time. Takings and net sales are the same figure; they should not be confused with net income. Net income is interchangeable with net profits or after-tax profits.

Calculation

Takings equals the total cash received in exchange for products sold or services delivered. To arrive at the net cash received, subtract returns from gross sales. Net sales can be accurately determined only after the return window on sold merchandise is closed. For example, if you sell clothing with a 30-day, full-refund policy and wish to calculate net sales for the month of March, you must wait until the end of April, as products sold in March can still be returned for a refund until the end of April. At that time, all returns with original sales dates that fell between March 1 and March 31 must be subtracted from total March sales to arrive at the takings realized in March.

Provisions

Sometimes, takings must be calculated within days after closing the books for a particular period; the accounting department cannot wait until all returns have been completed. In such cases, the returns are estimated and subtracted from actual sales to calculate takings. These estimates are usually referred to as “provisions for returned merchandise,” though other terms are also used. Accountants use a variety of methods to calculate the provisions. The most common method is to assume that the same percentage of merchandise will be returned during the most recent sales period as was returned during the same month or quarter of the prior year.

Importance

It is crucial, especially for a retail store, to take in sufficient funds during every sales period. Because profit margins in the retail business tend to be narrow, a retailer cannot turn a profit without substantial net sales. Retail sales in the economy as a whole are a key predictor of consumer confidence and corporate profitability; they are closely followed by economists and policymakers alike.

References

About the Author

Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He has been quoted in publications including "Financial Times" and the "Wall Street Journal." His book, "When Time Management Fails," is published in 12 countries while Ozyasar’s finance articles are featured on Nikkei, Japan’s premier financial news service. He holds a Master of Business Administration from Kellogg Graduate School.