Some people, including accountants and bookkeepers, tend to use these two words interchangeably, for example, the Profit and Loss Report is also called the Income Statement. Confusing, right?! Then others throw in the word “Net” to further clarify profit. Let’s get into these terms so we can better understand what everyone is talking about.
Well first off, the Income Statement and the Profit and Loss are the exact same report. However, those two terms are referring to two different numbers on this particular report. Income is the first number on the report and refers to the total amount of sales or revenue earned by the business. Also called Gross Revenue.
Income is actually found in two places on this report, but people usually are referring to Net Income when speaking about Income. It is also a business’s profit. This is the income after Cost of Goods Sold (COGS) and Expenses are subtracted from the Gross Income/Revenue figure. It is Net of expenses and COGS.
You will find that some people use the term income to mean revenues. For example, a bank or an individual will often refer to the interest they earn on bond investments as interest income or investment income. A retailer will refer to the sales of merchandise as revenues, but the revenues from secondary activities will be reported as other income or non-operating income.