Revenue Vs Income: What is Revenue and Income?

This article presents a summary of the primary distinctions that may be made between revenue and income. A company's revenue is the amount of money it generates by selling the goods or services it offers to customers (also known as the "top line"). The term "income" can refer to either a company's revenue or its net income, which is calculated by subtracting the company's operational expenses from its revenue (also known as the "bottom line").

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Types of Revenue

Let's take a more in-depth look at what is meant by the term "revenue" by examining some instances of the various sorts that are regularly encountered in the fields of finance and accounting.

The following are categories of revenue:

  • The buying and selling of goods, products, or other types of merchandise
  • The provision of services, such as consulting, for financial gain.
  • Earnings derived from the rental of a business property (note the usage of the word "income")
  • The purchase of concert tickets by concertgoers.
  • Earnings from interest on loans and deposits

Types of Income 

Because accountants frequently refer to "revenue" when they mean "income," the phrase "income" can occasionally lead to misunderstandings, as we have already seen. When we talk about "net income," we mean the amount of money left over after deducting all of the costs.

The following are categories of income:

  • Earnings before taxes (before any expenses are deducted)
  • Profit after tax (after all expenses are deducted)

Discover more about the topic "Gross vs. Net."

Examples of Revenue and Income

In order to further clarify the point, let's look at some examples, shall we? Take a look at each scenario down below, and after you're done, see if you can figure out how you would classify it.

Example #1

Pizzas, soft beverages, munchies, and dips are among the items that customers purchase from Tom's Pizza Inc. directly. Customers can choose to pay for the items with cash or with a credit card while purchasing them. Tom hands over all of the receipts from sales to his accountant at the end of the year, along with the invoices and receipts for all of the costs associated with staff compensation, supplies, electricity, and food and drink purchases. After tallying up all of the expenses, Tom's accountant informs him that his Budget is 125,869. "net income" is the correct response.

Example #2

The diverse array of photographic services offered by Sara's Photography Ltd. includes portraiture, wedding photography, family photography, and coverage of special events. She bills her customers in advance for these services, and at the end of the year, she compiles all of the invoices into a spreadsheet, where she then calculates that her total revenue for the year was $248,120. The correct response is "revenue."

Income Statement

The income statement (also known as the Statement of Profit and Loss) is a financial document that is used in accounting to provide a summary of a company's sales, expenses, and net income.

The following is an excerpt from Amazon's annual report (10-k) for the year 2016, which includes both the company's revenue (which they refer to as "net sales") as well as its net income.

The preceding examples, it is hoped, have provided a clearer understanding of how a corporation reports specific elements, and the distinction between the top line and the bottom line has been made a little bit more evident. 

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