Difference between Revenue and Sales

Abstract:

In the business glossary, the terms revenue and sales are frequently used as equivalents; however, they are barely recognisable differences that discriminate between the two. Revenue demonstrates the aggregate sum of money produced by the organisation from its assorted scope of business activities. It outlines the income acquired from selling merchandise, conveying administrations or services, or involving capital differently, connected with the centre exercises of the business, prior to giving impact to the costs and expenses.

Then again, sales are concerned with the returns got from the offering of products and services to the clients. It addresses the agreement between the purchaser or the buyer and merchant or the seller that joins the exchange or transfers of title of products, in return for sufficient consideration.

Despite the fact that sales and revenues are viewed as something very similar, generally speaking, there is as yet a slight distinction between sales versus revenue.

Income or revenue is the aggregate sum of cash produced by an organisation. Sales are the absolute thought accumulated from selling products and sales by an organisation.

Sales are a subset of income and revenue. Furthermore, now and then, income or revenue can likewise be lower than in sales.

Meaning of Revenue:

The earnings produced by the business from its functional and non-functional exercises are known as revenue. It is the gross sum, prior to deducting any expense and costs. It alludes to the total of all cash got by the organisation during a specific period.

There are a few sources of an organisation’s income or revenue that incorporate the two incomes from its centre and fringe tasks. Such sources are dividends, rent, fees, donations, royalty, the sale of old assets, interest, etc. Whenever income or revenue is obtained from the normal tasks activities or operations (essential exercises) of business, it is known as sales income (working income). Then again, income from different sources is called non-working income or non-operating revenue.

Income can be different for the services and products industry; for example, an assembling firm will procure the greatest piece of its income from the offer or sale of products. Conversely, service delivering firms like a beauty parlour will get the most extreme piece of their income from conveying administrations to clients.

Income shows up at the highest point of the income statement, from which all discounts, taxes, and different costs are deducted to show up at the net gain of the organisation. Total compensation or net income shows up at the lower part of the bottom line of the income statement.

Meaning of Sales:

Prior to understanding the importance of sales, we should initially take a look at the significance of the word ‘sale’ – it is the trading of products and services, for consideration by which responsibility or the transfer of ownership passes to the purchaser with the exchange of merchandise. The term sales is not vastly different from ‘sale’. It is the absolute monetary worth or the total economic value of the output sold by the business during a specific monetary year.

Sales can be acquired by increasing the quantity of units sold by the organisation during the year with the selling cost of the item. Sales really allude to adding up to total sales of the organisation; for example, it incorporates both money, credit sales and cash sales. The income produced from the offer of products and services is known as sales income or sales revenue.

Difference between Revenue and Sales:

REVENUE

SALES

Meaning

The earnings received by the company, across its various sources is known as revenue.

Sales is concerned with the selling of goods and services to customers and clients, in exchange for money, during an accounting year.

Computation

Revenue can be computed by adding sales with other income.

Sales can be computed by multiplying the total goods/services sold with its price.

Representation

It represents the business’s capability to invest and allocate its resources to increase the earning potential of the firm.

It represents a business’s ability to sell its core products and services to earn a profit.

Nature

It is the resultant of sales

It is the source of the company’s revenue.

Constitutes

It constitutes the total revenue.

It constitutes the operating revenue.

Consolidates

It consolidates all sources of income, that is, interest, dividend, royalty, sales and so on.

It is the economic value of the product and service that is obtained from the customers.

Example

If sales of ABC is Rs. 20,000, and income from other sources is Rs. 5,000, then revenue would be Rs. 25,000.

If products sold by CDE are Rs. 2,000, and the price per product is Rs.10 per product, then sales would be Rs. 2000.

Conclusion:

As may be obvious, revenue and sales aren’t the equivalents regardless of whether we use them conversely.

At the point when an organisation simply begins, it has basically no presence in the market. That is the reason remaining afloat includes creating cash to a great extent so that it can deliver items/make services and sell them. That is the reason obviously, sales regularly come when the organisation has the cash to make items/purchase items at a less expensive cost.

Income or revenue, then again, is a perfection of all types of revenue (speculations, counselling, interest got, expenses charged, and so on) and the sum gathered in view of sales.

Since sales are a significant piece of an association’s income, we use revenue and sales as equivalent words. To get the revenue and sales, a financial backer/layman requires to see how the income statement is designed and organised. In the event that an individual figures out how to peruse the income statement, one will plainly see the contrast between the sales and the revenue.

Also, see:

Difference Between Reserve and Provision

Difference Between Capital Reserve and Revenue Reserve

Difference Between Sales and Marketing

Difference Between Savings and Investment

Difference Between Cash Credit and Overdraft

Mcqs on Profit and Loss

Mcqs on Reconciliation of Cost and Financial Accounts

Mcqs on Cash Flow Statements With Answers

Financial Statements

Leave a Comment

Your Mobile number and Email id will not be published. Required fields are marked *

*

*