Definition of Revenues and Earnings
Revenues are the amounts earned from providing goods or services to customers during the period shown in the heading of the income statement. Revenues are the amounts earned before deducting expenses (cost of goods sold, SG&A) and losses. Revenues are sometimes referred to as the top line amount on a company’s income statement.
Earnings or net income are often referred to as the bottom line amount on the income statement, since it is the remainder after subtracting the cost of goods sold, SG&A, non-operating expenses, and losses from the revenues (both operating revenues and nonoperating revenues and gains). When a corporation’s stock is publicly-traded, the amount of earnings must also be shown on the income statement as earnings per share (EPS) of common stock.
Example of Revenues and Earnings
Assume that for the most recent year a corporation had net sales of $410,000; cost of goods sold $230,000; SG&A $120,000; interest expense $10,000; income tax expense $9,000.
For the recent year the corporation’s revenues were $410,000 and its earnings were $41,000.
