Difference Between Revenue vs Income
If you think that the difference between revenue and income is straightforward, then you have another thing coming. The reason is that the two terms overlap in many different ways as they are all about money and sales. Without a doubt, these are terms we hear every day from the media, at work, in conversations, etc.
So, if you have a challenge understanding the disparity between them, you will certainly have a different tale to share after reading this informative guide. As we always promise, you will not have any need to read any other related articles after going through this piece. Now, let us start with their definitions first.
Definition of Revenue
Revenue is the total earnings of a business. The sum could be generated from the sale of goods or rendering a certain service. There are companies that make theirs through renting properties, interest generated from lending, services provided, recurring payments, etc. Indeed, there are many different ways of making money.
It is noteworthy that it is the amount an organization makes when necessary deductions have not been made yet. Deductions, in this context, could be taxes, salaries, discounts, utility bills, etc. A good analogy will make it clear. For example, a software development firm sells its software solution to a target market. At the end of its financial year, the enterprise calculates all the proceeds from software sales to be $500,000.
However, the organization paid staff salaries, paid the relevant authorities to get the patent for the software, renewed utility bills (phone, power, rent, etc.), and was charged for many other expenses. Regardless of the amount incurred in expenses, the revenue of the firm remains $500,000. Before discussing the difference between income and revenue, let’s explain the former.
Definition of Income
Income is the amount of money left when a business or individual has subtracted the expenditures. More often than not, there are two ways of making money: goods and services. In other words, people or firms offer services or sell goods and get paid in return. No doubt, they paid to acquire the skills or invested handsomely in their inventory or production process to churn out some finished goods.
Either way, there is always an expense that goes into them. A simple analogy is a tech company that sells smartphones. Because the enterprise does not produce the smart devices, they will have to buy them. Once they have purchased the cellphones, they may have to pay for warehousing, loading, transportation, unloading, staff salaries, utility bills, etc.
Therefore, the income of the business = total earnings – total expenditure
For instance, if a startup made $1,000,000 in 2019 but incurred a total expense of $650,000, then the income is $1,000,000 – $650,000 = $350,000.
Keep in mind that while that term describes an organization’s income in the explanation above, it can also be used to describe people’s take-home pay after taxes have been subtracted.
Main Differences Between Revenue vs Income
The table below explains revenue vs income concisely.
|Basis of Сomparison||Revenue||Income|
|Meaning||Proceeds realized after the sale of products or total payment for service delivery||The total sum left after all the incurred expenses have been subtracted|
|On the organization’s financial statement||Top line||Bottom line|
|Types||Operating and non-operating||Earned and unearned|
|Dependency||This does not rely on any factors at all||This largely depends on total earnings and expenditure|
|Total sum||This usually involves a huge amount||This is usually low because deductions have been made|
|Planning||Companies cannot use it to plan until deductions are made||Firms can use it to plan for the next financial year because it is the “cash at hand”|
Difference Between Revenue and Income: Conclusion
In conclusion, there are a plethora of disparities between the two terms. In summary, this guide on income vs revenue would be incomplete without highlighting their dissimilarities. First of all, the former is the sum realized after expenses have been deducted from the latter.
It is noteworthy that a firm can only plan when it has subtracted all its expenditures from its total earnings. Afterward, it will be able to strategize and make a feasible budget for the next business year, thanks to its savings.