As a business owner, when you look at the financial statements that your accountant or an accounting firm in Singapore that you have outsourced your accounting tasks to has prepared to you, the terms sales and revenue may look familiar. However, do you know their differences? Some people may think that the terms sales and revenue bring the same meaning. However, some slight dissimilarities make them different from each other.
Revenue refers to the total amount of cash that the company has generated from the business activities that it has carried out. It outlines the income generated when the company sell goods, deliver services, or use its capital (Also see Differentiating Capital Expenditures and Operating Expenses), regardless of the ways it uses them. Revenue is the gross amount of income that the company has generated before the deduction of any expenses or cost (Also see What is Meant by the Term “Cost Pool”?). It is the sum of all the money that the company has received in a certain period.
A company’s revenue (Also see An Overview of Contra Revenue) can come from different sources. This means that a company can obtain revenue from its principal and incidental operations. Some examples of those sources are dividend, interests, royalty, donation and others. Besides, there are two types of revenue, which are operating revenue and non-operating revenue. The former refers to the revenue that a company receives from its routine operations, and the latter are those that it has obtained from other sources.
On the other hand, sales are the earnings that a company has received through the sale of goods and services to its clients. It shows the contract between the seller and the buyer. Sales are related to the transfer of the ownership of the goods. In this situation, adequate consideration is required for the exchange.
Sales are the total economic value of the products that a company has sold in a certain financial year. If you want to calculate the sales of your company, multiply the selling price of the product that your company is selling with the number of units sold in that year. The revenue that the company has generated from selling the goods and services is called the sales revenue.
Sales and revenue have a close relationship with each other. Revenue is the outcome of sales, and sales are one of the sources of a company’s revenue. Sales will bring operating revenue to the company, and without sales, the company will not have sales revenue. However, the company can still earn revenue (Also see The Difference Between Revenue and Retained Earnings) from sources other than sales.