Difference Between Income and Revenue

Income vs Revenue

Many people mistake “income” and “revenue” as the same thing. However, there are many small differences between the two financial concepts.

Both “income” and “revenue” are financial and business terms. Their meanings closely resemble each other because they are often used in the same context. Both concepts are applicable in accounting and economic disciplines.

“Revenue,” for instance, is the total amount of money that a business earns by doing its activities. These activities include selling a product or a service, but it can also be earned by an indirect means. Indirect business revenue can be gained if a business has placed money in investments.

On the other hand, “income,” also known as “net profit,” is the money left for a business after it subtracts costs and expenses from its revenue. Costs and expenses include the operational costs (salaries and wages, upkeep of machinery, security, expenses for raw materials, to name a few), depreciation, and capital. Costs can be categorized into many types (usually in tandem) that include fixed and variable costs, direct and indirect costs, and lastly, product and period costs. Income can also be categorized as positive or negative. Positive income means there is more revenue or less expenses while negative income accounts for a low revenue or high expenses.

In a worker’s perspective, income and revenue are the same. If a worker receives compensation, it is his revenue and income. Some companies and governments automatically remove the taxes and benefit payments from workers’ salaries. What employees then receive is the remainder after all deductions.

Another distinction between the two is their placement in a company’s financial statement. Revenue is on the top line while income is on the bottom line. Sometimes these placement terms are used instead of both “revenue” and “income” in business communications.

Both concepts also adhere to different computations. Income is calculated by subtracting costs and expenses from total revenue. Revenue is calculated by multiplying the price to the number of units sold.

The discipline of economics takes income and revenue into a wider and bigger picture. Economics looks at the revenue and income of a whole industry or a whole country. This particular perspective enables the country or industry to assess whether growth is possible or already occurring. Economics takes into account factors like the income and revenue of both individuals like workers or investors as well as entities like governments and businesses.

Summary:

1.“Income” and “revenue” are concepts used in business, finance, and economics. Both are terms that denote money or cash equivalents that are received by an entity (a business, company, or government) or a person (workers). Both concepts are observed after or within a specific period of time.
2.Both concepts are also used in different levels; personal, business, and national. Accounting is usually used to calculate income and revenue on a personal and business level. In contrast, economics takes the national level and worldwide view.
3.“Revenue” is generated after a business produces and sells products and services. The computation of revenue includes multiplying the price by the number of units sold. “Income” is received after the deductions for costs and expenses from the revenue.
4.“Revenue” and “income” are both involved in the cycle of production. “Revenue” is the starting point of “income” while “income” provides the monetary power and cash flow to produce the next cycle of production and, in extension, the revenue.
5.In a financial statement, “revenue” and “income” are placed at different venues. “Revenue” is at the top while “income” is placed at the bottom. These placement terms (top line for revenue, bottom line for income) are used to refer to both concepts in business speak.