Difference Between Revenue vs Net Income
Revenue can be defined as the total value of sales made by an entity during a particular period of time. Revenue can be classified as gross revenue or gross sales and net revenue or net sales. Revenue vs Net Income in this, the total value of gross sales can be calculated by multiplying the total number of items that the company is able to sell during a particular period with the selling price quoted per item. The total value of net sales can be computed by deducting the total sales discount and sales return (if any) from the gross revenue/sales. Net income or NI can be defined as the number of profits that are left with the company after making the necessary adjustments pertaining to the reduction of all the cash outflows and summation of all the cash inflows of the same. In other words, net revenue can be regarded as what an entity has earned whereas net income can be regarded as what an entity is actually left with.
Net income or NI is generally the last item that is computed in an income statement unless there is a calculation made for the computation of EPS or earning per share. On the other hand, revenue is calculated much ahead of net income in the income statement. The dependence of net income on the revenue earned by a company cannot be ignored since it is the basis on which the same can be computed. Hence, a wrong computation of revenue would have an impact on the computation of the net income and in all probabilities, the figure ascertained for the latter would also be wrong. However, a wrong computation of net income would not have any impact on the calculation of revenue.
Head to Head Comparison Between Revenue vs Net Income
Below are the Top 7 comparison between Revenue vs Net Income:
Key Differences Between Revenue vs Net Income
The key differences between revenue and net income are enlisted and discussed in detail as follows:
- The basic difference between revenue and net income could be the fact that the former is the total amount of money actually earned by an entity during a particular period whereas the latter is the actual total earnings that are left with a company after making all the necessary adjustments like depreciation, interest, cost of doing business, cost of goods sold, taxes, deductions, discounts, and so on from the total revenues earned by the same during a particular period.
- Another difference could be the order of calculation of revenue and net income in the statement of income of a company. Revenue is calculated way ahead of net income and the latter is usually calculated at the last or second last in the statement of income. The calculation of earnings per share usually decides if the net income is the last calculation or not in an income statement. If there is a requirement for the calculation of earnings per share then the calculation of net income falls at the second last whereas if there is no need for the calculation of earnings per share then the calculation of net income happens at the last in the income statement.
- The above-stated factor is also a reason why revenue is also termed as a superset of the NI and latter as a subset of the former.
- Revenue or net sales will not have to depend on the NI whereas the latter totally relies on the computation of the revenue.
- In the absence of revenue, the calculation of net income is next to impossible.
- The amount of revenue is always a greater amount in comparison to the amount of Net income.
Revenue vs Net Income Comparison Table
Given below are the major difference between Revenue vs Net Income:
|Basis of Comparison||Revenue (also known as net sales)||Net income (or NI)|
|Formula||Revenue = Number of items sold by the company * Average selling price quoted for each item, or,
Revenue = Number of consumers * Average price quoted for services.
|NI = GI – Expenses, or,
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NI = Revenue – COGS – Expenses, where,
COGS stands for the cost of goods sold and GI stands for Gross Income.
|Calculation in the income statement||Revenue or net sales to be placed in the third position in a profit and loss or income statement.||Net income or NI to be placed at the last or the second last item in a statement of income. If EPS or earning per share is not required to be calculated then Net income is the last item that is calculated in the statement of income while if EPS is required to be computed than it is regarded as the second last item that must be computed in the aforesaid statement.|
|Inter-dependence||Revenue doesn’t depend on the NI.||Net income totally depends on net sales or revenue. Without the computation of revenue, it is impossible to calculate the NI.|
|Superset or subset?||Revenue can be regarded as the superset of the NI.||Net income is regarded as a subset of net sales or revenue.|
|Greater or lesser||The amount of revenue is always greater than the amount of Net income.||The amount of net income is always lesser than the amount of revenue.|
|Income and expenses||Revenue comprises of all the incomes and expenses.||Net income is the difference evaluated between the expenses incurred and the revenues earned by an entity.|
|Discounts and deductions||Revenue comprises of all the deductions and discounts.||Net income does not include any sort of amount pertaining to deductions and discounts.|
To conclude on a lighter note, it can be said that the revenue is not a final amount that is earned by an organization whereas net income is the final amount that is actually earned by an organization. This is due to the fact that net sales or revenue comprises of all the amounts pertaining to deductions, discounts, taxes, interest, cost of goods sold, depreciation and such other expenses whereas net income is the remaining amount of profits that an entity is left with excludes all such expenses and includes all other sources of income earned by an entity during a particular period.
This is a guide to Revenue vs Net Income. Here we discuss the difference between Revenue vs Net Income, along with key differences, infographics, & comparison table. You can also go through our other related articles to learn more–