In business terminology, sales and revenue are used by people interchangeably, but both of these words have a fine difference that sets them apart from each other. Sales are income generated from selling goods and services produced by the company.
It is referred to a transaction between seller and buyer, where a seller sells a good to a buyer in exchange for money. On the other hand, revenue is the total income generated by the company from various activities. It outlines the income earned from selling goods and services as well as making the use of capital of the company to make profits.
In this article, you will learn about sales and revenue and also learn about the key differences between both of them
What is Sales?
Let us first learn about the meaning of the word “sale” before understanding the meaning of “sales”. The meaning of word sale is the transfer of goods and services from the seller to the buyer in exchange for money. The term “sales” has a quite similar meaning as that of the word “sale”. The meaning of sales is total capital earned by selling goods and services of a company in one financial year.
The total amount of sales can be obtained by multiplying the total number of goods sold with the price of a single unit. The sales actually are total sales made by a company which consists of both credit sales as well as cash sales and the total capital generated by selling goods and services of a company is called sales revenue.
What is Revenue?
Revenue is total income generated by the company through operational as well as non-operational activities in a financial year. Revenue is the gross amount before making any type of expenses or deducting any type of cost. Company’s revenue is produced using peripheral and core operations. Peripheral operations can be a dividend, interest, fees, rent, royalty, donation, sales of old assets etc.
Revenue generated through the sales of goods and services, also known as core operations, of a company is known as sales revenue. On the other hand, revenue generated through all others means or peripheral operations is called non-operating revenue. In different industries, revenue is generated by different means such as a manufacturing company will earn its maximum revenue by selling goods, whereas a service providing firm generates maximum revenue by delivering services to its customers.
Revenue comes at the first place in an income statement and all expenses such as taxes, discounts, and other expenses are deducted from it and the remaining amount is called net income. Net income is placed at the bottom of the income statement.
Relation between Sales and Revenue
Sales are revenue is not the same but they are related. “Sales” is a part of revenue. Revenue is generated from investments, interest on debts, and licenses as well as sales income. In a few businesses, there are no other sources for generating revenue other than by sales. In those businesses, total sales income is equal to total revenue generated. In those cases, sales and revenue terms can be used interchangeably.
Key difference between Sales and Revenue
|Sales is the total income of a company by selling goods and services produced by it.||Revenue is the total amount of income generated by a company by all means.|
|Total sales can be calculated by multiplying the total number of sold goods with the price of the goods.||Total revenue can be calculated by adding total income from sales and other incomes.|
|Sales show the capability of a company to sell primary products and services to make profits.||Revenue shows the ability of a company to invest and allocate its resources to make profits.|
|Sales is a part of total revenue generated by the company||There can be revenue without any sales.|
In conclusion, we can say that sales and revenue are two inseparable terms. As you have learned in this article that there are distinguishing points that separates them. No one can deny the fact that income from sales is most important income for a company, however, there are other sources which can generate a good income in addition to income from sales of goods and services. At last sales, income can be referred to as revenue only in the case when sales are the sole source of income for a company.