Have you ever wondered about the difference between revenue and income? In today's complex business world, these two terms are often used synonymously. However, reality clearly shows important differences between them.
In this article, we'll explore the important aspects of revenue and earnings, from their basic definitions to the factors that influence them. Let's review how revenue and income are presented in financial statements and related issues.
What is revenue?
Revenue is the amount of money a company or organization earns from selling goods, providing services, or making other business transactions. It represents the total amount of money collected from customers or business partners during a specific period of time.
Revenue can include sales, rent, service fees, advertising, investment revenue, or any other revenue source related to an organization's business operations. This is the amount of money the company makes before operating expenses, taxes, and rebates are subtracted.
What is income?
Income is the total value of money that an individual, household or organization receives from different sources during a certain period of time. It may include sources of income such as salaries, bonuses, commissions, and other revenues. On this basis, income can vary widely depending on the level of labor, capacity, professional qualifications and industry in which each individual or organization participates.
Difference between revenue and income
Income and revenue are completely different concepts. Revenue refers to the total value of assets that an individual or organization receives from business activities such as making sales, providing services, and performing work. It includes revenues from primary activities such as sales or provision of services, investment activities such as sales of non-stock assets and securities, along with the organization's financial activities.
Income, on the other hand, refers to the difference between a business's cost of goods and its revenue from sales. However, this only applies to goods. In the case of providing services, it is assumed that income is equivalent to revenue since there are no material costs.
In short, the difference between income and revenue lies in the calculation and scope of application. Revenue is the total value of assets received from business activities, while income is the difference between the cost of goods and the revenue from sales, with the difference in applying to both goods and service.
Formula for calculating income and revenue
The formula for calculating revenue and income provides a clear view of the difference between these two concepts in business.
The income calculation formula can be simple or complex, depending on the business. In the case of product sales, income is calculated by multiplying the average price of the product by the number of products sold.
Income = Number of units sold x Normal price or Income = Number of consumers x Average price of the service
Meanwhile, the revenue calculation formula commonly used by businesses is:
Revenue = Total sales value of product/service x Unit price of product/service + other surcharges.
Through the above formula, we can see that revenue is calculated based on the total value of the product or service sold, plus other surcharges.
An overview of the formula for calculating revenue and income shows the difference between these two concepts. While revenue focuses on the value of business transactions, income focuses on the amount of money an individual or household earns from various revenue sources.
The main function of income and revenue
The main functions of income and revenue also have extremely different meanings.
Income represents the actual value that a business receives from selling a unit of goods after deducting other costs. This is the actual amount after deducting operating costs and other items. Income is an important indicator to evaluate a business's profit and profitability from business activities.
In contrast, revenue's main function is to repay the money the company has spent on purchasing or producing goods. This is the total value of orders, contracts or transactions that the company has made. Revenue plays an important role in maintaining the stability and continuity of business operations.
If proceeds are delayed, the company's operations may suffer. Profits will decline, and the company may face penalties or breach contractual obligations related to producing goods or paying bills. Collecting money on time is very important to ensure the stability and development of the company.
Above is the difference between income and revenue that we have compiled. Hopefully through this article, you will be provided with useful information about business activities, thereby applying it to your practice. If you have any questions, please send them to us via the website.