Revenue vs Sales

Although revenue and sales are considered the same in many cases, there is still a slight difference between revenue vs. sales.

Revenue is the total amount of money generated by a company. Sales are the total consideration accrued from selling goods or services by a company.

Sales are a subset of revenue. And sometimes, revenue can also be lower than in sales.

Let’s take one example for each (sales > revenue and revenue > sales) to illustrate revenue vs. sales.

Sales can be said as the price paid by the customers for the company’s goods or services.

It is common practice that large companies don’t fully depend on sales for revenue but also have other kinds of income like investments, services, interest, royalties, fees, and donations, to name a few.

• Investments: Investments in government bonds, equity shares, etc.;
• Service income: Revenues for installation or services
• Charges and Interest: Late payment of money by customers
• Royalties/Licensing: fees for the use of rights or the name of your business
• Fees: professional services charge for copies made, travel, and mileage reimbursements.

If the total sales of Sweet Umbrella Inc. are $200 billion, and the incomes generated by other means are $4 billion, then the total revenue generated by Sweet Umbrella Inc. is $204 billion.

It shows that revenue will be more than the sales in this case.

Think about the first item of the income statement of the company. It is gross sales. Why do we call it gross sales? It’s because it’s a figure that includes the sales returns/sales discounts (if any). When we deduct the sales returns/discount from the gross sales, we get the revenue (net sales).

In this case, sales are more than revenue.

For example, if the total sales of Greenery Company are $20,000, the cost incurred due to replacement is $400, and the cost incurred due to other discounts and deductions be $1600. Then the total revenue generated by the Greenery Company is $18,000.

The above example shows that sales are more than revenue in the above case.

Here is the list of top 4 differences between Revenue vs. Sales.

Here are the key differences between revenue and sales –

1. Both revenue and sales are used as the same, but when seen in accounting terms, both can be easily differentiated.
2. Revenue can be calculated by adding sales with other income the company generates, whereas sales can be calculated by multiplying the total goods/services sold with its price.
3. Revenue can exist without sales, but sales automatically turn into revenues. For example, we can talk about a new company that may have a small revenue by renting its own working space to other new businesses, but until it has sold a unit of product, it didn’t generate any sales.
4. Revenue shows a company’s resourcefulness in generating money, whereas sales show its ability to sell its products/services.

Here are the main differences between revenue vs. sales –

As we can see, sales and revenue aren't the same even if we use them interchangeably.

When a company just starts, it has almost no existence in the market. That’s why staying afloat involves generating money from here and there so that it can produce products/create services and sell them. That’s why clearly, sales often come when the company has the money to manufacture products/ buy products at a lower price.

On the other hand, revenue is a culmination of all sources of income (investments, consulting, interest received, fees charged, etc.) and the amount collected because of sales.

Since sales are a major chunk of an organization’s revenue, we use sales and revenue as synonyms. An investor/layman needs to understand how the income statement is formatted and arranged to understand the sales and revenue. If an individual learns to read the income statement, she will see the difference between the revenue and the sales.

This article has guided the top differences between Revenue and Sales. Here we also discuss the Revenue and Sales differences with examples, infographics, and comparison tables. You may also have a look at the following articles for gaining further knowledge in Basic Accounting –

• Revenue vs. Turnover
• Gross Sales vs. Net Sales
• Recurring Revenue
• Outside Sales