What is the difference between revenue and sales?

Revenue is the total income generated by the sale of goods or services, related to the company's core operations.

• Revenue is often referred to as the “top line” because it sits at the top of the income statement.
• Revenue is the income a company generates before any expenses are subtracted from the calculation. Therefore, a company reporting "top-line growth" is experiencing an increase in gross sales or revenue.

Sales are the proceeds a company generates from selling goods or services to its customers.

• In accounting terms, sales comprise one component of a company's revenue figure.
• On an income statement, sales is typically referred to as “gross sales”.

Some companies inaccurately use the term "sales" and "revenue" interchangeably. However, while sales might be considered to be revenue, all revenue doesn’t necessarily derive from sales. Consider the following financial data from Exxon Mobil Corporation's (XOM) 2017 income statement: 

• Sales and operating revenue were roughly $237 billion for the year.
• However, there were income sources other than sales proceeds, totaling more than $7 billion (highlighted in green). Consequently, revenue may be higher than the sales-only figure, given the supplementary income sources.

Oil and gas companies commonly generate income from the sale of assets, during time periods when they’re cash poor. Other non-operating revenue gains may come from occasional events, such as investment windfalls, money awarded through litigation, interest, royalties, fees, and donations. Regardless of the source, these sporadic gains indicate a company’s total cash flow. 

Sales may be defined as prices paid by customers, while revenue signals the overall money a business generates during a given time period. Although revenue is nearly always the larger figure, it may occasionally be smaller than sales. Take, for example, a business that only sells hats, with no other inventory on its shelves. If this store's revenue formula deducts any discounted sales, returns or damaged merchandise, the company's gross sales could theoretically shake out to be larger than its revenue.

Revenue can also be used to describe money a government collects from taxes, fees, fines, and publicly-operated services. However, while government agencies may sell goods or services, the proceeds from these activities are seldom referred to as “government sales”.

Whether it's sales, gross sales, net sales, or revenue, it’s critical to consider the industry in question, when analyzing a company’s financial data. It’s also important to distinguish between sales and revenue, because some revenue sources 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?"