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What is income and revenue?

What is income and revenue? Does that include all money that the business gets i.e. all money that is paid to the business regardless of the source and the basis for the payment?

Also, is there a difference between income and revenue?

Thanks for your time.

Posted in Business & Commerce, asked by lefe, 4 years ago. 851 hits.

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Revenue or Income refers to cash inflows to a business. The words are often used interchangeably, however we can note a distinct difference.

Revenue refers to all inflows and amounts earned from the usual operations of the business. Example, for a company who manufactures and sell pencils, all revenue earned from the sale of pencils would constitute revenue. Revenue is usually split into 2 different streams, sales revenue and services revenue, depending on the nature of the business's operations.

Income on the other hand is used by accountants to describe the amount net of revenues and expenses i.e. where expenses have been deducted from the revenues earned. Some key figures include:

i. Gross income - sales less cost of sales (being the expenses related to producing the products included in sales and getting them to the point of sale)
ii. Other income - includes income received from sources which do not constitute e.g. interest income, rental income (provided the business is not a rental agent, etc) and dividend or investment income
iii. Operating income - profits remaining after other income has been added and operating expenses deducted
iv. Net income after tax - final profit figure after taxation has been calculated and deducted

It is also important to note that income and revenue relates to inflows which result from operations of the entity. This does not include inflows due to sale of capital assets (except inventories). Say for instance, a vehicle is sold for $25,000. This represents a cash inflow for the business. This is not however a revenue item as no work was performed to "earn" that $25,000. Let's include the fact that the vehicle had a book value of $18,000 at the time, thus resulting in a $7,000 profit. This profit is called a gain and will be included under "other income" in the income statement.

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4 years ago
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