Financial Intelligence, Revised Edition: A Manager's Guide to Knowing What the Numbers Really Mean

7

Revenue

The Issue Is Recognition

We’ll begin at the top. We already noted that sales—the top line of an income statement—is also often called revenue. So far so good: only two words for the same thing isn’t too bad, and we’ll use both, just because they’re so common. But watch out: some companies (and many people) call that top line “income.” In fact, the popular accounting software QuickBooks labels it income. Most banks and financial institutions also call it income. That’s really confusing because “income” more often means “profit,” which is the bottom line. (Obviously, we have an uphill battle here. Where are the language police when you need them?)

A company can record or recognize a sale when it delivers a product or service to a customer. ...