“Are revenue and income the same?” You might be the one asking this question if you don’t know about these terms of business or finance. You might consider them the same as in both cases you receive the money.
So if you’re one of them with this confusion, we’re going to erase this misunderstanding by discussing the difference between income and revenue in this short blog.
What is Revenue?
Revenue is the total sum of money a business earns by selling its services and goods. It is also known as gross sales or top-line earnings. This value is placed on the top of the income statement.
Types of Revenue:
To get a deeper understanding, have a look at some types of revenue:
- The money earned from the sale of good, merchandise and items
- The money earned from the sale of services like teaching
- Rent earned through a commercial property
- The money from the sale of tickets in a concert
- Interest income earned by lending
Boost your revenue and decrease expenses with our accountants. Contact now!
What is Income?
Income is the total net profit or the net income after deducting the operating expenses from the revenue. It is also called bottom-line earning and is placed at the bottom of the income statement.
Types of Income:
For better understanding, here are the types of income:
- Gross income (before deducting expenses)
- Net Income ( after deducting expenses)
If someone asks, “Are revenue and income the same?” Explain to them the difference between the both by this example.
Examples of Revenue and Income:
A reputable company will have high revenue and sales. Whereas the optimal gross profit varies depending upon the company type and the types of goods and services they provide.
A company that has a great turnover, but it’s improperly managed or administered can’t move forward. If the company is consuming excessive operating costs, then its revenue is of no use. As more cost can have a drastic effect on the net income, therefore we should be concerned about it. You should remember that unnecessary costs and improper management can create an alarming difference between the top line and the bottom line in the income statement.
Example of Revenue:
A Nesto supermarket sells different items to its customers. People pay for these items by cash and credit card and there is a track record of every transaction on daily basis. At the end of the year, the accountant records all the transactions on a spreadsheet or on accounting software, and the total turnover reaches $1.5 million. This amount is revenue as it is the money received from the sale without any deduction.
Example of Income:
At the end of the year, the accountant of the Nesto supermarket calculates the expenses including energy cost, employees’ wages, bills, and food and drink cost. After deducting all the expenses from the revenue, the net profit or income was around $0.8 million after deducting expenses from $1.5 million.
The income statement is also known as the statement of profit and loss that summaries expenses, income and revenue of the company.
Quick Wrap Up:
From now onwards, if someone asks “Are revenue and income the same?”, just send him/her this blog link to let him know the difference. To find out how much your business is earning, you need to look at both revenue and income. If your revenue increases, your income also increases automatically, provided your management and expenses are properly handled.
To find out more about your business growth, reach out to our accountants for help.
Contact us today!
Disclaimer: This informative blog is an overview of revenue and income.