Income is the total income from the sale of goods or services , related to the main activity.
- The company is often called the top line because he is sitting at the top of the income statement.
- Profit is the income the company generates before any costs are taken. Therefore, when the company “top-line growth,” the company observed an increase in gross sales or revenues.
Sales are the proceeds from the sale of goods or services to its customers.
- From the standpoint of accounting, sales are one of the components of the company’s revenues.
- In the statement of profit and loss, sales, usually called gross sales, or top line, as sales are often used interchangeably with revenue.
As Sales And Profits May Differ
As mentioned earlier, it depends on the industry, as some companies use sales and revenue interchangeably. However, the sale can be considered a profit, but this does not necessarily mean that all the income from sales.
Below is part of Corporation “Exxon Mobil” (SOM) report on the proceeds from its 2017 10K statement.
- Sales and operating income for the year of approximately 237 billion.
- However, there were other sources of income totaling over $ 7 billion (highlighted in green). As a result, income may be higher than sales, since there can be other sources of income except sales.
In the oil and gas industry, for example, very often for the purpose of earning income from the sale of the asset, if the company does not have enough money. These non-operating sources of income, often because they are non-recurring one-time events or benefits. Income can also include windfall from investments or money awarded in a judicial proceeding and will be considered as non-operating income. Other streams of income can include interest, royalties, fees, and donations. The company covers all these diverse sources and better showing the total cash flow generated by the company. Some companies treat the sales as operating income and revenue, and total profit, but the same distinctions apply.
The Sale May Exceed The Revenues
Sales can be defined as the economic price paid by the customers. Revenue is the total amount of money taken in business for a certain period of time. Although revenue is almost always more, the company may actually be less than sales. Consider a business that only sells hats and has no other sources of income. If its formula, the company deducts any discounts from sales or returns or damaged caps, then the gross revenue can be more than her income.
The company can also be used to describe funds that are made to the government from taxes, fees, fines and any operated services. While it is possible for a government Agency for the sale of goods or services, you rarely see the income call-government sales.
Whether it’s the gross sales, net sales, or income, if you are analyzing a company, it is important to note that the company owns in the analysis of the company’s revenues. When looking at the financial statements of the company, it is important to distinguish between sales and profit, as some sources of income may be one-off events.
For more on this topic, please read what is the difference between revenue and income? and what is the difference between revenue and profit?