Difference Between Revenue and Income
The term Revenue depicts the total amount of money earned by an organization by sale of products or rendering of services and at what price is it sold or rendered, while the term income is obtained by deducting all the direct and indirect expenses from revenue showing how well an organization utilizes its resources and achieves its goals using its limited resources.
In terms of concepts, they are completely different. They are two important terms that are useful in determining the financial strength of a company.
- Revenue is the total amount of money generated by the sale of a company’s goods or services.
- Income can be deduced by subtracting the total expenses from the total revenue generated by the company.
They can be found in the same financial statement, i.e. the income statement. But the income is a subset of the revenue; whereas the revenue is the superset of the income.
We start the income statement by gross sales and then deduct the sales return or sales discount. And we get net sales. From net sales, we deduct all the expenses (including the operating costs) and we get the income.
Example
Let’s say that ABC Company has sold 3000 products which cost $20 each. So, the total revenue generated is $60000.
Now, let’s say that ABC Company’s total costs include the operational costs (salaries and wages, upkeep of machinery, security, the expense for raw materials, etc.), depreciation, and capital of about $48000. Then the total income or net income will be ($60000 – $48000) = $12000.
- The income, for example, shows how well the company utilizes its resources and reduces its expenditure and operational costs to effectively increase the company’s income.
- On the other hand, revenue only shows us how many products the company has managed to sell and the prices at which they are sold but doesn’t depict the utilization of resources in an efficient way.
Revenue vs Income Infographics
Key Differences
- To a layman, revenue and income may sound synonymous, but they’re completely different from each other. Revenue is when a company receives a “consideration” while they sell products/services. On the other hand, when we deduct the cost from the revenue, we get the income.
- Revenue can be calculated by multiplying the number of products sold by their selling price; whereas income can be generated by deducting the total expenses from the total revenue. We also need to consider that to find out the net income we also include income from other sources (sales of scraps, profit on the sale of machinery, etc.).
- Revenue is also termed as “top line” which means it is at the top of the company’s financial statements whereas income is also termed as “bottom line” which means it is present at the bottom line of the company’s financial statements.
- They are both involved in the production cycle. “Revenue” is the starting point of “income” whereas “income” provides the monetary cash flow to produce the next cycle of production and thereby is creating revenue.
Comparative Table
| Basis for comparison | Revenue | Income |
| Meaning | The total amount of money generated by sales of goods or services | Income or Net Income is a company’s total profit or earnings |
| Calculation | It is calculated by multiplying the number of goods sold by its price (i.e. gross sales). To find out the net sales, we need to deduct sales returns/sales discounts from gross sales. | Income is calculated by subtracting the total costs (includes operating expenses, administrative expenses, etc.) from total revenue |
| Placement | Revenue is placed in the top line of a company’s financial statement | Income is placed in the bottom line of a company’s financial statement |
| Example | XYZ has posted total revenue of $25 billion at the end of the fiscal year 2017 with a 6% increase in top-line growth | XYZ has posted $6 billion in total income at the end of the fiscal year 2017 with a 4.5% increase in bottom-line growth |
| Alternative Names | Sometimes companies use the term top line instead of revenue | Sometimes companies use the term bottom line instead of income |
| Subset/Superset | It is a superset of the income. | It is a subset of the revenue. |
Final Thoughts
In simple terms, there’s a huge difference between revenue and income. Even if many people use them interchangeably, but if you ask an individual that has studied finance, she would tell you that revenue is a big picture, whereas the income shows the financial direction of a company.
Since the income statement is one of the four statements that every investor should look at, you should check the revenue and the income both. It may so happen that a company earns huge revenues but doesn’t generate any income (rather than loss). What if you just equate the revenue and income, what would you say in this case?
Like income, even loss would come after deducting all the expenses from the revenue of the company. If the total expenses exceed the total revenue, we will get the loss.
Revenue vs Income Video
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