Revenue & Sales are the basic terms in the business field & people use them interchangeably. But this is a misconception that these two are the same meaning.
As a result, one should know about Revenue vs Sales for reference & use in the future.
So, here we dive in.
Revenue vs Sales: Definitions
What is Revenue?
Revenue is the total income a company generates from the sale of goods or services that will be allotted to the company’s primary functions.
Revenue is said to be the income that the company generates before any expenditures are subtracted from the calculation.
What are Sales?
Sales are the earnings a company makes by selling products to its customers. In accounting terms, sales are one of the subsets of the company’s balance sheet.
A company may notify net sales, which is the outcome of deducting any returned products & costs incurred on the transport from the gross sales. Retail companies tend to declare net sales along with the revenue that the company earned.
Revenue vs Sales: Is Revenue also known as Sales?
No, Revenue & Sales are different terms. So, the following are the important differences between Revenue & Sales:
- Accounting definitions: Both revenue & sales are considered the same & used interchangeably. But when it is seen by accounting teams, then both can be easily differentiated.
As Revenue is the money generated from normal business operations. While Sales means the volume of goods & services sold by a business during a certain period. - Method of calculations: Revenue can be calculated by summing up sales with other earnings generated by the company. Notwithstanding that sale is calculated by multiplying the total no. of products sold by their price.
- Revenue is a wider term: Revenue can be present without sales, but sales are part of revenues.
For example, you can assume a new company that will have a small revenue by renting some of the products or space. But until it sold any product, its sales generated will be accounted as nil. - Objectives: Revenue shows your company’s ability to generate dollars. Whereas sales show a company’s capacity to sell its products.
And this was all about Revenue vs Sales which you should know. Now, I hope you can correct someone if they mix up between revenue vs sales.
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