Sales vs Revenue: Difference and Comparison

Savings, income, money, and many more such words are essential to every man’s life. Whether a small business or a big multinational company, a nuclear family, or a big joint family, money (income) is significant for a living (primary standard).

A few terms are allotted to the total sum gained or lost by a company. It is essential to track the money to run any business successfully.

Key Takeaways

1. Sales refer to the total number of goods or services a company sells during a specific period.
2. Revenue is the total amount a company generates after deducting any discounts or returns.
3. Sales and revenue are interlinked, but revenue considers factors such as price and discounts, whereas sales do not.

Sales vs Revenue

Sales are the income a company generates from selling its goods and services, whereas revenue is the income (of all activities) caused by a company before subtracting any expenses from the total calculation.

Sales are the proceeds generated from selling goods or services by a company to its customers. Sales are the subset of revenue. Sales occur when the company has the money to manufacture and sell it to its customers.

Revenue is the company’s total income before subtracting any expenses from the calculation.

Revenue shows how resourceful and capable a company is in generating money (maximize it). In simple words, it is a culmination of all a company’s income sources (investments, royalties, etc.).

Comparison Table

Parameters of Comparison	Sales	Revenue
Definition	Sales is the income generated by a company from selling its goods and services to its customers.	Revenue is the income generated by a company before subtracting any expenses from the total.
Method of calculation	Sales are calculated by multiplying the total number of goods/services by the price.	Revenue is calculated by adding all the sales along with the other sources of income.
Indication	The company’s capability of selling its primary goods/service to gain profit.	It indicates the company’s ability to invest and allocate resources to maximize profits.
Relation	Sales are a part of the revenue, directly or indirectly getting counted in the payment.	Revenue can exist without sales.
Represents	That sales are a part of operating revenue.	Revenue is generated from both operating and non-operating activities.

What is Sales?

The proceeds generated by a company after selling goods and services to their customer are known as sales. They comprise one component of the company’s revenue (total) and are a subset of revenue.  

Sometimes sales can be larger than the revenue. Sales are known as gross sales and can be found at the top of the income statement.

Sales indicate that a company can make a profit by selling and serving its customers with its primary goods/services.

Sales are any transaction done (including money) in exchange for a good or service. Sales are not considered until a product is delivered or the transaction is complete (based on the accounting).

Double-entry booking – in this method, a sale is recorded as a debit to cash and a credit to a sales account. The actual monetary value of the transaction is recorded and not the list price of the merchandise.

Types of sale transactions include cash sales, credit sales, and advance payment sales.

For example, if the number of products a company sells is 3000 and the price per piece is 10 rupees, then the sale value is 30,000. (3000 x 10)

What is Revenue?

Revenue is the total amount of money a company generates (including – sales, investment, etc.) before subtracting any expenses. It includes the outcome of sales.

Revenue can exist without sales, as it is the aggregate of all the money in a specific period. Revenue indicates the company’s ability to invest and allocate resources to maximize its earning potential.

Sales revenue/ operating revenue – the revenue received from the business’s primary activities.

Non-operating revenue – the revenue received from other sources.

The goods and services can have different revenues. When all the other expenses are deducted from the revenue, we get the net income indicated in the statement’s bottom line. (Total revenue – expenses = net income)

For example – if a company’s sales are rupees 3000 and rupees 100 is the income generated by other means, then the company’s total revenue is rupees 3100 (3000 +100).

Main Differences Between Sales and Revenue

1. Sales turn into and are a part of revenue, whereas revenue can exist without sales.
2. Sales are the income received after selling some goods and services during a particular financial year, whereas revenue is the money generated by the company from its various other activities.
3. Sales are the vital source of revenue, whereas revenue is the outcome of sales.
4. Sales are calculated by multiplying the total number of goods/services sold by their price. In contrast, revenue is calculated by adding the deals with all the other sources of income( investment, royalties, etc.)
5. Sales are a part of the operating revenue, whereas revenue is generated from operating and non-operating activities.
6. A sale represents the company’s ability to sell its products, whereas revenue represents the Company’s resourcefulness in generating money

References

1. https://www.jstor.org/stable/248507
2. https://books.google.co.in/books?hl=en&lr=&id=GhdDbEM-_5oC&oi=fnd&pg=PR5&dq=revenue&ots=wJ0SXDv6NX&sig=fbISn2KinsyuegVuLyWbRniWzdk

Last Updated : 11 June, 2023