Revenue vs Sales

The key difference between Revenue vs Sales is that Revenue refers to the total income generated by any business entity by selling their goods or by providing their services including other income during the normal course of its operations, whereas, the sales refers to the proceeds received by the company against the selling their goods or by providing their services.

Differences Between Revenue vs Sales

Although revenue and sales are considered the same in many cases, there is still a slight difference between revenue vs. sales.

Revenue is the total amount of money generated by a company. Sales are the total consideration accrued from selling goods or services by a company.

Sales are a subset of revenue. And sometimes, revenue can also be lower than in sales.

Revenue-vs-Sales

Let’s take one example for each (sales > revenue and revenue > sales) to illustrate revenue vs. sales.

Example #1 – Revenue is greater than Sales

Sales can be said as the price paid by the customers for the company’s goods or services.

It is common practice that large companies don’t fully depend on sales for its revenue but also have other kinds of income like investments, service, interest, royalties, fees, and donations, to name a few.

  • Investments – Investments in government bonds, equity shares, etc.;
  • Service income – Revenues for installation or services
  • Charges and Interest – Late payment of money by customers
  • Royalties/Licensing – fees for the use of rights or the name of your business
  • Fees – professional services that charge for copies made, travel, and mileage reimbursements.

If the total sales of Sweet Umbrella Inc. are $200 billion, and the incomes generated by other means are $4 billion, then the total revenue generated by Sweet Umbrella Inc. is $204 billion.

It clearly shows that revenue will be more than the sales in this case.

Example #2 – Sales is greater than Revenue

Think about the first item of the income statement of the company. It is gross sales. Why do we call it gross sales? It’s because it’s a figure that includes the sales returns/sales discounts (if any). When we deduct the sales returns/sales discount from the gross salesGross SalesGross Sales, also called Top-Line Sales of a Company, refers to the total sales amount earned over a given period, excluding returns, allowances, rebates, & any other discount. read more, we get the revenue (net sales).

In this case, sales are more than revenue.

For example, if the total sales of Greenery Company are $20,000, the cost incurred due to replacement is $400, and the cost incurred due to other discounts and deductions be $1600. Then the total revenue generated by the Greenery Company is $18,000.

The above example clearly shows that sales are more than revenue in the above case.

Revenue vs. Sales Infographics

Here is the list of top 4 differences between Revenue vs. Sales.

Revenue vs Sales

Revenue vs. Sales Key Differences

Here are the key differences between revenue and sales –

  1. Both revenue and sales are used as the same, but when it is seen in accounting terms, both can be easily differentiated.
  2. Revenue can be calculated by adding sales with other incomes generated by the company, whereas sales can be calculated by multiplying the total goods/services sold with its price.
  3. Revenue can exist without sales, but sales automatically turn into revenues. For example, we can talk about a new company that may have a small revenue by renting its own working space to other new businesses, but until it has sold a unit of product, it didn’t generate any sales.
  4. Revenue shows a company’s resourcefulness in generating money, whereas sales show a company’s ability to sell its products/services.

Revenue vs. Sales – Head to Head

Here are the main differences between revenue vs. sales –

Basis of comparison between Revenue vs. SalesRevenueSales
MeaningA total amount of money generated by the companyIncome generated by the selling of the company’s goods or services
CalculationRevenue is calculated by adding sales with other income.Sales can be calculated by multiplying the total goods/services sold with its price.
ExampleIf sales of XYZ is $20,000, and income from other sources is $5,000, then revenue would be $25,000If products sold by XYZ are 2,000, and the price per product is $10 per product, then sales would be $2000.
Indicatesthe company’s ability to invest and allocate its resources to maximize the earning potentialIndicates a company’s capability of selling its primary goods/services to make a profit

Final Thoughts

As we can see, sales and revenue aren’t the same even if we use them interchangeably.

When a company just starts, it has almost no existence in the market. That’s why staying afloat involves generating money from here and there so that it can produce products/create services and sell them. That’s why clearly, sales often come when the company has the money to manufacture products/ buy products at a cheaper price.

Revenue, on the other hand, is a culmination of all sources of income (investments, consulting, interest received, fees charged, etc.) and the amount collected because of sales.

Since sales are a major chunk of an organization’s revenue, we use sales and revenue as synonyms. To understand the sales and revenue, an investor/layman needs to understand how the income statement is formatted and arranged. If an individual learns to read the income statement, she will clearly see the difference between the revenue and the sales.

Video on Revenue vs. Sales

 

This article has been a guide to the top differences between Revenue vs. Sales. Here we also discuss the Revenue and Sales differences with examples, infographics, and comparison tables. You may also have a look at the following articles for gaining further knowledge in Basic Accounting –

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Comments

  1. Ron says

    Excellent explanation of the differences between revenue and sales. VERY GOOD!

    • Dheeraj Vaidya says

      Thanks for your kind words!