Income vs Revenue: Difference and Comparison

The terms “Income” and “revenue” determine the financial strength of a business, individual, or country.

Income refers to the net earnings after deducting all the company, enterprise, individual, or country expenses during a financial year.

On the other hand, revenue refers to the total or gross earnings without deducting expenses of the same.

Key Takeaways

1. Revenue is the total amount earned from sales or services, while income represents the profit after deducting all expenses.
2. Companies use the revenue to measure business performance, while income provides insights into profitability.
3. Both revenue and income are essential for financial analysis, but they serve different purposes in assessing a company’s health.

Income vs Revenue

Income is the total earnings of an individual or household after all their expenses have been subtracted in a particular period of time. Income in a business or company is the net profit. Revenue is the total amount of income a company has earned by selling goods and services in a financial year.

A company’s income refers to the profit earned by it after deducting all the costs and expenses of a financial year. It is also known as the “Net profit”, “Net income”, or “Bottom line” of a company’s financial statement.

It shows the full image of a company’s cash flow and includes all the expenses.

A company’s revenue refers to its total earnings generated by its daily operations, i.e., the sale of goods or services provided.

It is also known as “top line” or “gross sale” in a company’s financial statement. It does not show the actual financial condition of the business.

Comparison Table

Parameters of comparison	Income	Revenue
Meaning	Income is the net profit earned by a business by selling goods or providing services after deducting the operating expenses in a financial year.	Revenue is the total earnings without deducting any expenses of a business through selling products or providing services.
Calculation	Calculated by subtracting Total cost (operating and other expenses) from Total Revenue.	Calculated by adding all the profits and gains of the year or by multiplying the number of goods sold by their price.
Position on financial statement	Bottom Line	Top Line
Dependent on	Revenue and expenses of a financial year	Sales or production of goods and services during a financial year
Size	Less than revenue	More than income

What is Income?

Income is the total earnings of a household, individual, or business, excluding all their expenses in a certain amount of time. In a company, it is the company’s net profit in a financial year.

It is calculated by subtracting a company’s total cost or expenses in a financial year from its total revenue.

1. There are overall 3 types of income:
   • Active Income – When the income is earned by working for a certain amount of time, it is called active income. Ex- Wages, Salary, tips, commissions etc.
   • Portfolio income – When the income is earned by profit from investments, then it is called portfolio income. Ex-Dividend, Interest, Royalties etc.
   • Passive Income– When the income is earned by businesses or activities in which we are not actively involved, then it is called passive income. Ex- Rent, Lease, profit from a partnership business etc.
2. A company’s Net income displays all of its gains and losses as all the expenses and losses are deducted from the total profits. Hence, it is presented at the bottom of a country’s income statement or financial statement.

What is Revenue?

Revenue is the total income generated by a company by producing goods or services in a financial year.

It is calculated by multiplying the total number of products sold by a company by the price of each product or by calculating the total amount earned by providing certain services by a company or individual.

1. There are mainly 2 types of revenues-
   • Operating Revenue-It is the revenue that a business earns by doing its core activities of the business. For example, Sales revenue and service revenue.
   • Non-operating revenue- It is the revenue that a business earns by activities other than its core operational activities. For example, Interest revenue, Rent revenue.
2. Revenue can also be classified in terms of economics as-
   • Total Revenue –Total Revenue is the sum of a firm’s income, receipts, and sales. It is also multiple for price and output.
   • Average Revenue –Average Revenue is the revenue earned by selling per unit commodity of a product.
   • Marginal revenue–Marginal Revenue is the revenue earned by selling an additional unit of the commodity. It is also referred to as the change in the total revenue when an additional unit is sold.

Main Differences Between Income and Revenue

The main difference between Income and revenue is that. When a company earns something, it is called revenue, and when the cost and expenses of production and selling process are deducted from the revenue, it is known as Income.

1. Income is Net Value, whereas revenue is Gross value.
2. Income shows the actual profit or earnings of a company, individual, or household. While Revenue does not show the accurate profit of the company, it just shows the gross value earned by it.
3. Income excludes all the operating expenses of a company in a certain period. On the other hand, Revenue includes all the operating expenses of a company for a certain period.
4. Income can be calculated by subtracting the total expenses from the total revenue. On the contrary, revenue can be generated by multiplying the number of products sold by their selling price. Income from other sources, such as sales of scraps, profit on the sale of machinery, and other miscellaneous incomes, are also included in the net income.
5. Another term for income is “bottom line,” which implies that it is at the bottom of the company’s financial statements. And, Revenue is also known as “top line,” which means it exists at the first line of the company’s financial statements.

References

1. https://www.tandfonline.com/doi/abs/10.1080/17449480.2012.664395
2. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/conlr25&section=9

Last Updated : 13 July, 2023