Income vs. Revenue

Income vs. Revenue

Income and revenue are often believed to be the same concept, as they both refer to positive incoming cash flow. However, that is where their similarities end. For accountants and corporate entities, income and revenue each represent a separate type of incoming cash, and each result in different placement on a company's financial statements.

Revenue is the total amount of cash received from the sale of goods or services for a company. For example, everything that Wal-Mart sells in their stores, minus any coupons or discounts, from clothing to cleaning supplies, is considered revenue. It is also often referred to as net sales, or the top line. However, Wal-Mart has other means of incoming cash flow, such as investments and other income streams, and because this incoming cash flow is not from Wal-Mart's primary means of business, it is considered income.

Income refers to the net profit that remains after all expenses have been accounted for, and is often referred to as the bottom line. These expenses include rent, payroll, and the cost of goods sold (COGS). The resulting figure is the net income, also known as the company's profit. With that profit, a company might pay dividends to shareholders or reinvest the profits back into the business.

Let's use an example. Company ABC sells computers for $1000 each. In one year they sell 50,000 computers, bringing in revenue of $50,000,000. In the course of doing business that year, they have operating expenses of $35,000,000. These operating expenses could include payroll, rents, materials and equipment depreciation. Therefore, the net income for Company ABC is $15,000,000.

When completing the income statement, or the profit and loss statement, revenue is the first line, or "top line". After all expenses are deducted, the resulting figure is on the last line, or "bottom line".

Remember, Income = Revenue - Expenses.

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