Revenue vs. Income: Understanding the Key Differences

This guide provides an overview of the main differences between revenue vs income. RevenueSales RevenueSales revenue is the income received by a company from its sales of goods or the provision of services. In accounting, the terms "sales" and is the sales amount a company earns from providing services or selling products (the “top line”). Income can sometimes be used to mean revenue, or it can also be used to refer to net income, which is revenue less operating expenses (the “bottom line”).

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Types of Revenue

Let’s take a closer look at what revenue can mean by looking at examples of the different types that frequently appear in finance and accountingAccountingAccounting is a term that describes the process of consolidating financial information to make it clear and understandable for all.

Types of revenue include:

• The sale of goods, products, or merchandise
• The sale of services, such as consulting
• Rental income from a commercial property (notice the use of “income”)
• The sale of tickets to a concert
• Interest income from lending

Types of Income

As we explained above, the term “income” can sometimes be confusing, as accountants often use it to refer to a revenue. The term net income clearly means after all expenses have been deducted.

Types of income include:

• Gross income (before any expenses are deducted)
• Net incomeNet IncomeNet Income is a key line item, not only in the income statement, but in all three core financial statements. While it is arrived at through (after all expenses are deducted)

Learn more about “Gross vs Net.”

Examples of Revenue vs Income

Let’s look at some examples to further illustrate the point. Read through each case below and see if you can determine what you would categorize it as.

Example #1

Tom’s Pizza Inc sells pizzas, soft drinks, snacks, and dips directly to customers. The customers either pay for the products with a credit card or with cash. At the end of the year, Tom gives his accountant all the receipts from sales, as well as invoices and receipts for all employee wages, supplies, energy, and food/drink costs. His accountant takes all the receipts and tells Tom his ________ is $125,869. The answer is “net income.”

Example #2

Sara’s Photography Ltd provides a wide range of services, including portrait photos, wedding shots, family photos, and special occasions. She charges clients for these services upfront and at the end of the year, enters all the invoices into a spreadsheet and determines that her _______ is $248,120. The answer is “revenue.”

Learn more in CFI’s Free Accounting Courses.

Income Statement

In accounting, the income statement (also called the Statement of Profit and Loss) summarizes a company’s revenues, expenses, and net income.

Below is an example of Amazon’s 2016 annual report (10-k), which contains both revenue (which they label as “net sales”) and net income.

Hopefully, the examples above have provided a clearer view of how a company reports certain items, and the difference between top line and bottom line is a little clearer.

Additional Resources

Thank you for reading this guide on revenue vs income. We hope it has helped your understanding of accounting and financial reporting.

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