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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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Revenue vs. Income

Comments (76)

Put this in the pet peeve rant category. I’m tired of “Revenue” being referred to as “Income.”

Yes – I know Quickbooks defaults to “Income.” I know it’s technically correct when referring to “Income accounts” in a company’s “Chart of Accounts.” But it’s confusing, and it baffles me.

I spent a few minutes tonight trying to figure out the origin source of this but got bored. I did find a fun explanation in the source of all truth (Wikipedia).

Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms.

For households and individuals, income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received.

For firms, income generally refers to net-profit: what remains of revenue after expenses have been subtracted. 

I’ve decided this is a confusion being promulgated by Quickbooks. Since many first time entrepreneurs use Quickbooks before they learn basic accounting, they end up referring to “income” (instead of revenue) and “net income” as “income minus expenses.” Factually true, but confusing, especially when “net income” is often referred to by many as simply “income,” since those same people will refer to “income” as “revenue.”

Confusing? You bet. Whenever I ask “do you mean your bottom line or your revenue” I’m often surprised by which answer I get, including “I’m not sure what you mean.”

Help stop the madness. Call the thing at the top of the P&L “Revenue,” not “Income.”

Rant off.

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