Revenue is the total amount of money that you received from the selling of goods, products, and any other service during the time shown in the income statement. Another definition of revenue is the money received until the cost of selling products before tax and deducting, so Revenue is the gross amount of money earned from the business. Revenue is also the same meaning of income. Revenue is the profit generated by a company when it provides a customer with a service or a product.
Earnings is the net amount of money or profit that you received after the cost, expenses, losses, and the deduction, it’s called also net profits.
How are revenue and earnings similar?
Companies and investors use revenue and earnings to determine a company’s health, growth, and performance. These estimates indicate how much money the organization has gained.
Organizations use the revenue to calculate income by excluding all costs from sales.
What is the difference between revenue and earnings?
While both revenue and earnings provide an idea of the money that the business had received. There is a specific application of this information. Revenue indicates the quality of a company’s profit such as how much money they can gain from the profit, how many customers they have, and how their sales increase from month to month or from quarter to quarter.
Comparison between revenue and earnings
Other investors or other potential stakeholders want to check the sales or earnings of a company to decide whether the business is successful or not.
Consider these consideration when comparing revenue and profits, and when determining what to figure to evaluate:
1–Definition: Revenue is the total amount of money but the earnings is the remain of the total after expenses and deduction.
2-Measurement: Revenue calculates how much revenue a company will produce while earnings calculate the profits from the business after expenses.
3–Use: Revenue is used to calculate sales but earnings is used to calculate the income.
4–Calculation: Calculate the revenue by adding all the source of the income but we calculate the earnings by the subtracting of the revenue from expenses and deduction.
5–Impact: A high level of revenue shows more profits and the company’s inflow, while a lower level of revenue indicates less profit and less inflow. A high level of earnings shows good profits or loses, whereas low income shows weak benefits.
6–Preference: In general earnings are the preferred factor for the accounting purposes as they show for both income and expenses.
What are the steps for Revenue process?
1-Top line: Revenue is also called ‘top line’ because it stays at the top of the income statement of your company. The top line refers to the income or gross profits from your company. If your company has the top-line success that means you‘re selling more than of your goods or services.
2–Calculating revenue: Revenue is measured at the end of the accounting period which is usually monthly or yearly. You have to add the money that you earned to measure the company’s income.
3-Balance sheet: The income will impact the balance sheet, a balance sheet is a financial statement that gives you an overview of the assets and liabilities of your company, as well as the sum that your shareholders have invested. If the payment terms of your business are cash only then your profits will produce a corresponding amount of cash on your balance sheet.
Types of Revenues
Operating revenues: The operating revenues are generated from the core business activities of your company. Operating revenues such as Sales, Rents & Consulting services.
Non–operating revenue: They are derived from the activities that are not related to the core business of the company (e.g. interest revenue and Dividend revenue).