The terms revenue and income are sometimes used interchangeably in the world of finance or finance. Many people believe that both terms, income or income, have the same meaning. However, who would have guessed, it turns out that the two terms are not synonymous.
Of course, as a business owner or financial professional, you must understand what the two terms mean. So, to ensure that you are not mistaken, read the following reviews.
Revenue and Income Definition
In a nutshell, revenue is the income earned by a company as a result of its primary operational activities. The amount does not include the investor’s capital, which will be deducted from the value of the discount, if any.
Simply put, revenue is defined as the company’s profit or net profit over a given time period. Revenue is split into two categories: operating revenue and non-operating revenue. Operating revenue is revenue generated directly by the company, such as by providing services or selling specific products.
Meanwhile, non-operating revenue was generated from other sources, such as share profits and deposit interest. Several other factors influence revenue, including goods and money return services, interest rates, the amount of currency exchange, the types of products and services owned, and the prices of products and services offered.
In contrast to income, profit is the profit that a business has successfully obtained. If revenue refers to the company’s income, income is more concerned with how much profit or net profit it has earned.
The term income is also known as net income. This is due to the fact that the amount earned is the sum of all revenues minus the total production costs. This cost of production includes the cost of goods sold, company operating expenses, taxes, and other expenses.
It should be noted that income includes all of the company’s other sources of income. This additional source of income can take the form of funds derived from the sale of assets or interest earned from investment activities owned. As a result, the calculation of income will appear more detailed and complicated than the calculation of revenue.
To simplify understanding of revenue and income, the conclusion that can be drawn is that income is the net profit obtained from the business less the costs incurred. Meanwhile, revenue can be defined as gross profit from operating results that has not been reduced by costs incurred, or it can be more commonly referred to as total sales turnover.
What’s the Distinction Between Revenue and Income?
So, what are the factors that differentiate revenue from income? The solution consists of the two points listed below:
- Based on Origin or Source
The first distinction is found in the origin or source of the two. Revenue is derived from more than just the company’s sales. Interest on deposits and investments also contribute to this income.
In contrast to the original income, which was solely from business profits. The results of product and service sales will be thoroughly calculated and converted into the company’s income or net profit.
- Using the Calculation Method
The distinction between revenue and second income can be seen in the way they are calculated. The company only needs to add up the cost or revenue elements when calculating revenue. Meanwhile, there are two methods for calculating income: calculating from net or gross profit.
The gross profit or gross profit is calculated by subtracting the income from the Cost of Goods Sold. Meanwhile, the net profit is calculated by subtracting the gross profit from an indirect budget related to the manufacturing process.
Also read: Definition of Demand and Supply Curves
The budget in question includes costs for promotion, tax payments, and other funds to ensure that services or goods produced reach consumers in a timely manner.
Revenue and Income, Which Is the More Profitable Option?
For investors looking to invest in a company, the amount of revenue and income generated by the company will undoubtedly be the most important factor to consider. However, if forced to choose, which of the two is actually more profitable?
According to calculations and other factors, the amount of income appears to be a factor of consideration and choice that can be said to be better when compared to revenue. Not without reason, the value of the shares will rise when the investment is made.
This means that the company’s earnings will rise as well. Dividends are typically distributed based on the amount of profit earned by the company. Even so, this does not imply that revenue is unimportant and should be overlooked when investors select a company in which to invest.
The reason for this is that in order to earn money, businesses must go through a process known as matching or comparison. When it comes to accounting science, this process is critical and must be followed when making decisions or calculating company income.
Also read: Small Capital Business Big Profit Easy to Do
This means that revenue and income are both important factors that play a role in business continuity and are interconnected. Not only that, but the right strategy is required for the business to run smoothly. So, how do we proceed?
It’s simple: use the iREAP POS application to keep track of all business activities. It is no longer difficult to track the movement of goods, monitor store branches without having to visit them, and determine how well employees are performing. This app serves as a substitute for a traditional cash register.
Also read: how to Create a Simple Sales Report
iREAP POS can be used not only by large corporations, but also by small businesses such as grocery stores, shoe stores, clothing stores, food stalls, workshops, and clinics. There are no hidden charges or freebies, no ad interruptions, and no data or transaction limits. It can also be used offline, with the exception of backing up data, without requiring an internet connection.
Use the IREAP POS application immediately for the convenience of your business anywhere, at any time. Simply go to ireappos.com to learn more about this cashier application.