Updated October 31, 2023
Difference Between Revenue vs Income
In Revenue vs. Income, revenue is the total amount of money a company makes from its business, i.e., by selling a product or service. In contrast, income is the amount left after removing all the expenses (rent, labor, etc.) from the revenue.
Let us study much more about revenue and income in detail:
- However, the underlying concept remains the same: revenue represents the total income reported, which encompasses all expenses and other payment obligations. In this section, we will consider a company’s revenue.
- This should not be confused with profit. As this figure includes costs and expenses related to that period, it is considered total sales. This is the beginning point of a profit and loss statement.
- There are different levels at which each type of cost and expense is subtracted from revenue (profit is calculated at each level). Net Profit is also derived from calculating the payout to be made by a company to its stockholders.
Consider the below hypothetical example of a Profit and Loss statement:
|Less: Cost of goods sold||60,000||55,000|
|Less: Selling expenses||9,000||8,000|
|Less: Administrative expenses||3,000||2,000|
|Less: Interest Cost||3,000||3,000|
|Less: Depreciation Expenses||10,000||10,000|
|Profit before Taxes||35,000||22,000|
|Less: Taxes @ 30%||10,500||6,600|
|Profit After Taxes (Net Profit)||24,500||15,400|
Revenue is also called “Sales” in a profit and loss statement. After deducting different types of expenses, different levels of profits are calculated (like Gross Profit, Operating Profit, Earnings before Interest, Depreciation, Taxes, and Amortization (EBIDTA), and Profit after Taxes (PAT)). Each of these types of profits has relevance, hence their existence.
For example, Gross Margin is a financial ratio that relies on a company’s gross profit to net sales; the higher this ratio, the more the company’s repayment power of interest, taxes, depreciation, and amortization costs required to pay.
Head To Head Comparison Between Revenue vs Income (Infographics)
Below are the Top 9 differences between Revenue vs Income
Application of Revenue vs Income
Below are the different applications of Revenue vs Income are as follows:
- Income is widely regarded as a more reliable profit figure because it is assumed to account for all expenses and other obligations that a company must pay out. Income is used in all types of analysis, including Total Earnings of the firm, Financial Ratios (which depend on the company’s profit), and the company’s payout to its stockholders.
- The measure of a company’s profitability and standing in the market.
- In certain cases, it may be a negative figure, meaning the company has more expenses than its income. Depending upon its account of expenses, it may also refer that the company may be using much of its revenue in inventory, towards research and development, or maybe towards the development of assets.
- The net profit figure can serve as a basis for future projections and can guide decisions to improve sales or develop the firm in other ways.
- The more the net profit, the more the chance of vertical and lateral expansions of the company. Expenses and reserves set aside for future obligations can affect the accuracy of the revenue figure, making it potentially misleading. Hence, deriving the final figure after all considerations is the safest way to understand where the company stands currently, how it can reduce costs and expenses to optimize net profits, and how sales can be enhanced.
Revenue vs Income Comparison Table
Let us conduct a comparative study to understand the comparison between Revenue vs Income.
|Gross income earned by a company||Net income after deduction of all expenses and costs.|
|Includes earnings from basic sales, which is the major use of the company.||The company’s revenue can be generated from earnings, such as sales, interest earned, or gains from selling an asset.|
|Measured during a particular period only (generally annually) from the sales of its products.||Net gain after deducting all expenses for a particular period can be from a specific gain by the company on a particular date from the sale of an asset or any other capital gain made from an asset.|
|Generally used to refer to income from a particular business by a company.||It can be made from different businesses (or attributed to multiple businesses).|
|Results in the different levels of profits after subsequent deduction of the particular expenses. For example, Gross Revenue – Cost of goods sold = Gross Profit.||It is the final figure of Net Profit after deducting all types of expenses.|
|Always includes recurring income from sales.||This can include income from other non-recurring sources like a sale of assets (a one-time activity in years).|
|Sources are always the sale of the company’s products||It may include other sources of income.|
|The beginning point of all accounts reporting and other analysis. All the analysis made for the company begins from the gross revenue generated.||After making all deductions from the gross revenue, the last point in the profit and loss statement is determined.|
|Dependant on sales of products||Depends on revenue (and sometimes on other sources as well).|
The company generates revenue through sales, representing the gross profit earned during the transactions. However, the company derives the actual profit, which is further utilized for other purposes, by subtracting all expenses incurred in the production and sale of products, along with other expenses required for running the company. This is the net profit or income, so all analysts, market drivers, and company projections prefer the same in their analysis.
This has guided the top 9 differences between Revenue and Income. Here, we take the difference between Revenue vs Income with examples, infographics, and a comparison table. You may also have a look at the following articles to learn more: