Turnover

What it means

Revenue from the sale of goods over a period, used as the base for profitability ratios.

Example

A trader with RM250,000 of sales in a year has a turnover of RM250,000.

Why it matters

Turnover measures trading size and is the denominator in the profit margin.

In practice

Turnover is the first line of the income statement, shown as sales or revenue before any costs are taken away. It reflects the value of goods sold, not cash received, so credit sales are included even if the customer has not yet paid. In the ledger it builds up as the total of the sales account for the period, adjusted for any returns inwards.

Suppose a shop sells goods worth RM120,000 during the year but has RM5,000 of returns. Turnover is RM115,000.

Students often confuse turnover with gross profit. Turnover is the whole sales value. Gross profit is what remains after deducting the cost of the goods sold. If those goods cost RM70,000, gross profit is RM45,000. Turnover says nothing on its own about whether trading is profitable. A business can record a large turnover and still make a loss once all expenses are counted.

If you are unsure how turnover, gross profit and net profit connect, one of our teachers can work through a full income statement with you. Book a trial class.

Related terms

• Sales
• Revenue
• Margin

Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 6.1 Calculation and understanding of accounting ratios (page 18).

Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.