# Revenue vs Income

#### Sarah Hiraki

· 06/12/2020  · 06/12/2020

An overview of revenue vs income. Revenue and income are both important tools to understanding the performance of your business. Income is what’s left of your revenue after expenses are subtracted.

## What is revenue?

Revenue is your business’ total intake from selling products and services. For sales-based companies, revenue is often calculated by using the following formula:

Revenue = Sales Price x Units Sold

Revenue, sometimes called gross income, is used as a “top line” measure of a company’s success. In other words, “how much did we sell this period?”

## What is income?

On the other hand, income (or net income) is what’s left of your revenue after expenses are subtracted. This is often referred to as the bottom line. Income can be calculated by using the following formula:

Income = Revenue - Expenses

A simple equation, but the thing that can be tricky here is that people often describe the terms in this formula using different words for the same ideas.

For instance, revenue is often called total sales or turnover, and in some cases expenses might also include ”direct costs” or known as the cost of sales or the cost of goods sold (COGS), especially for businesses that make or resell products.

## What’s the difference between revenue and income?

Both revenue and income (in these terms, and by their many other names) are important building of an income statement – the master document that shows a business’ performance over a period of time. On an income statement, you start with revenue and gains (plusses), and then begin subtracting expenses and losses (minuses).

Because of this, Revenue comes first, and can be viewed in simplest terms as the total amount of money a business has taken in from sales. Income, is revenue minus expenses – thus will always be a smaller figure than revenue. Income will be displayed at the bottom of the income statement, and gives a business a clearer picture of how much they were left with after this period of time.

Let's look at the following example: Avocado Ltd is a fictional firm that makes and sells fruit-shaped furniture in London. Over the past year, it achieved £100k in sales, but spent 50k on raw materials.

Income = (£100k Revenue - £50k Expenses) = £50k

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