Revenue vs Income

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Difference Between Revenue and Income

The term Revenue depicts the total amount of money earned by an organization by selling products or rendering services and at what price is it sold or rendered. In contrast, the term income is obtained by deducting all the direct and indirect expenses from revenue, showing how well an organization utilizes its resources and achieves its goals using its limited resources.

In terms of concepts, they are entirely different. Nevertheless, they are two critical terms that are useful in determining a company's financial strength.

Revenue is the total money generated by selling a company's goods or services.
Income can be deduced by subtracting the total expenses from the total revenue generated by the company.

They can be found in the same financial statement, i.e., the income statement. But the income is a subset of the revenue, whereas the revenue is the superset of the income.

We start the income statement with gross sales and then deduct the sales return or discount. And we get net sales. Then, from net sales, we deduct all the expenses (including the operating costs) and get the income.

Difference Between Revenue and Income

Example

Let's say that ABC Company has sold 3000 products for $20 each. So, the total revenue generated is $60000.

Now, let's say that ABC Company's total costs include the operational costs (salaries and wages, upkeep of machinery, security, the expense for raw materials, etc.), depreciation, and capital of about $48000. Then the total income or net income will be ($60000 – $48000) = $12000.

The income, for example, shows how well the company utilizes its resources and reduces its expenditure and operational costs to increase its income effectively.
On the other hand, revenue only shows us how many products the company has managed to sell and the prices at which they are sold but doesn't depict the utilization of resources in an efficient way.

Revenue vs. Income Infographics

Key Differences

To a layman, revenue and income may sound synonymous, but they’re entirely different. Revenue is when a company receives a “consideration” while selling products/services. On the other hand, when we deduct the cost from the revenue, we get the income.
Revenue can be calculated by multiplying the number of products sold by their selling price. In contrast, income can be generated by deducting the total expenses from the total revenue. We also need to consider that to find out the net income; we also include income from other sources (sales of scraps, profit on the sale of machinery, etc.).
Another term for revenue is "top line," which means it is at the top of the company's financial statements. Whereas another term for income is "bottom line," which means it is present at the bottom line of the company's financial statements.
They are both involved in the production cycle. "Revenue" is the starting point of "income," whereas "income" provides the monetary cash flow to produce the next cycle of production and thereby creates revenue.

Comparative Table

Basis for comparison	Revenue	Income
Meaning	The total amount of money generated by sales of goods or services	Income or Net Income is a company's total profit or earnings
Calculation	It is calculated by multiplying the number of goods sold by its price (i.e., gross sales). To find out the net sales, we need to deduct sales returns/sales discounts from gross sales.	Income is calculated by subtracting the total costs (includes operating expenses, administrative expenses, etc.) from total revenue.
Placement	Revenue is placed in the top line of a company's financial statement.	Income is placed in the bottom line of a company's financial statement.
Example	XYZ has posted total revenue of $25 billion at the end of the fiscal year 2017 with a 6% increase in top-line growth	XYZ has posted $6 billion in total income at the end of the fiscal year 2017 with a 4.5% increase in bottom-line growth
Alternative Names	Sometimes companies use the term top line instead of revenue.	Sometimes companies use the term bottom line instead of income.
Subset/Superset	It is a superset of the income.	It is a subset of the revenue.

Final Thoughts

In simple terms, there's a huge difference between revenue and income. Even if many people use them interchangeably, if you ask an individual who has studied finance, she would tell you that revenue is a big picture. In contrast, income shows the financial direction of a company.

Since the income statement is one of the four statements that every investor should look at, you should check both revenue and income. It may so happen that a company earns huge revenues but doesn't generate any income (rather than loss). What if you just equate the revenue and income? What would you say in this case?

Like income, even loss would come after deducting all the expenses from the company's revenue. If the total expenses exceed the total revenue, we will get a loss.