What is the difference between revenue and sales?


Income is the total income generated from the sale of goods or services related to the main operations of the company.

  • Income is often called the “top line” because it is at the top of the income statement.
  • Income is the income that a business generates before expenses are subtracted from the calculation.

A business reporting “top-of-the-line growth” is experiencing an increase in sales or gross revenue.

By comparison, sales are the revenue a business generates by selling goods or services to its customers:

  • In accounting terms, sales are a component of a company’s revenue figure.
  • In an income statement, sales are generally referred to as “gross sales.”
  • A business can also report “net sales,” which is the result of subtracting any returned merchandise from gross sales. Retail companies tend to report both net sales and revenue.

Key takeaways

  • Income is the income that a business generates before expenses are subtracted from the calculation.
  • Income is known as the “top line” number, as it is at the top of the income statement.
  • Sales are the income that a company generates by selling goods or services to its customers.
  • Businesses may post revenue in excess of sales figures only, given supplemental revenue sources.

Understand how sales and income can differ

Some companies misuse the terms “sales” and “income” interchangeably. However, although sales can be considered income, not all income is necessarily derived from sales. Consider the following financial data from the Exxon Mobil Corporation (XOM) income statement for the quarter ending June 30, 2019:

  • Sales and operating income were approximately $ 67.5 billion for June 2019 versus $ 71.5 billion for June 2018.
  • Total revenue was $ 69 billion for the quarter ending June 2019 and $ 73.5 billion for the same period in 2018.
  • However, there were sources of income other than sales income (from equity affiliates and other income) totaling more than $ 1.5 billion in 2019 and $ 2 billion in 2018.

As a result, companies may record revenue in excess of sales figures only, given the supplemental revenue sources.

Example of income from Exxon Mobil’s income statement for June 2019.
Investopedia

Non-operating income

Oil and gas companies commonly generate income from the sale of assets, during periods of time when they are short of cash. Other non-operating income gains can come from occasional events, such as windfall investment gains, money awarded through litigation, interest, royalties, fees, and donations. Regardless of the source, these sporadic gains indicate a company’s total cash flow.

Sales may exceed revenue

Sales can be defined as prices paid by customers, while revenue indicates the total money a business generates over a given period of time. Although revenue is almost always the highest figure, it can sometimes be less than sales.

Take, for example, a company that only sells hats, with no other inventory on its shelves. If the store’s revenue formula deducts discounted sales, returns, or damaged merchandise, the company’s gross sales could theoretically exceed its revenue.

Government revenue

Revenue can also be used to describe the money a government collects from taxes, fees, fines, and utilities. However, although government agencies may sell goods or services, the income from these activities is rarely called “government sales.”

The bottom line

Whether it’s sales, gross sales, net sales, or revenue, it’s critical to consider the industry in question when analyzing a company’s financial data. It is also important to distinguish between sales and income, because some sources of income can be one-time events.

www.investopedia.com

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Mark Holland

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