The Difference between Revenue and Income
When it comes to the financial aspect of a business, the terms “revenue” and “income” are often used interchangeably. However, these two terms have different meanings and understanding the difference between the two is crucial for accounting and financial purposes.
What is Revenue?
Revenue refers to the total amount of money a company earns through the sale of its products or services. This includes all the money earned from selling goods or services and any other sources of income. Revenue is considered a top-line item on a company’s income statement, which means it is the first item listed before any expenses are deducted.
Revenue is an essential element in determining a company’s financial performance. The higher the revenue, the more successful a company is likely to be. However, it is important to understand that revenue does not necessarily equate to profitability. A company can have significant revenue but still operate at a loss.
What is Income?
Income, on the other hand, refers to the amount of money a company earns after all the expenses have been deducted from its revenue. It is often referred to as the bottom-line figure as it appears at the end of the company’s income statement.
Income is a crucial factor in measuring a business’s financial success. It is the profit that a company makes, which can be reinvested for growth, paid out as dividends to shareholders, or used to pay off debt. A positive income figure is necessary for a company to stay in business in the long run.
The Key Differences
The primary difference between revenue and income is that revenue is the total amount of money earned by a company, while income is the amount left over after all the expenses have been deducted. Revenue is the top-line, while income is the bottom-line.
Another difference is that revenue is earned when products or services are sold, whereas income only exists after expenses have been paid. For example, a company may earn a significant amount of revenue from sales, but if its expenses are too high, it can still have a negative income figure.
Conclusion
In summary, revenue and income are two important financial terms that are often used interchangeably but have different meanings. Understanding the difference between the two is essential for businesses to keep track of their financial performance and make informed decisions. While revenue is important in measuring the success of a business, it is the income that matters most in the long run, as it determines the company’s profitability and ability to sustain operations.
Table difference between revenue and income
| Year | Revenue (in millions) | Income (in millions) | Difference (in millions) |
|---|---|---|---|
| 2017 | 100 | 10 | 90 |
| 2018 | 150 | 20 | 130 |
| 2019 | 200 | 30 | 170 |