An Accounting Approach to Online Gambling Sites

Posted: 6/4/2009

Online gambling sites may not resemble a traditional business, but their foundations are identical. Each gambling site is composed of the same business elements. Like every business, the accounting consists of two primary constituents - debits and credits.

Debits and credits are Latin rooted terms that serve as the basis of accounting. These terms are complex but they can be easily simplified. The best way to understand debits and credits is to view debits as what you spend and credits as what you get or have. For the purposes of generalizing them to online gambling sites it is easiest to correlate "debits" to expenses and "credits" to revenue. The next step in analyzing the business behind gambling sites is to relate these terms to each other.

Having established debits as total expenses, it is important to understand the source of these expenses. Online gambling sites have a variety of expenses. Although gambling sites do not have to endure the same expenses as live casinos, they have their own unique costs. For example, a website does not have to buy expensive equipment and machinery but they have to pay for state-of-the-art software to ensure a secure environment for their gamblers. Other prominent expenses include graphic design, advertising, and a customer service team staffed with extremely experienced personnel. These are just a few of the numerous expenses of an online gambling site.

Similarly to defining debits as expenses, credits can be described as revenue. The revenue for an online gambling site is derived from its players. People who gamble at an online casino are customers of that site. Some lucky individuals strike it rich, but a larger number lose money on these sites. This money is the site's revenue. The amount of money an online gambling site collects is thus extremely variable and depends entirely on attracting new members. This is how the expenses relate to revenue. Many of the costs are directly related to drawing players which in turn brings in revenue.

After expenses are applied to revenue an online gambling site either experiences a profit or a loss. The revenue a site earns, before expenses are applied, is known as the "gross revenue." Once the expenses are subtracted from the gross revenue, the result is known as the "net revenue." This can be calculated using the following equation: GR - E = NR, where GR = gross revenue, E = expenses and NR = net revenue. There net revenue is defined as the total amount of money an online gambling site earns after it accounts for the money it spent. If NR is a positive number, the gambling site is said to have made a profit. If NR is a negative number, the gambling site is said to have suffered a loss. Thus, the ultimate goal is to have the greatest NR by increasing GR and reducing E.

In conclusion, the accounting of online gambling sites can be simplified and analyzed relatively easily. Every gambling site is a separate business and thus has specific sources of expenses and revenue. These expenses and revenue are titled debits and credits. The debits and credits of online gambling sites determine whether they experience an overall profit or ultimately endure a loss.

Additional Gambling Articles

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