Revenues vs Expenses
Revenues vs Expenses are two important terms in accounting and finance, and they are use to measure the financial performance of a business.
It is the income earn by a business from the sale of goods or services. It is the money that flows into the business as a result of its operations. Revenues are recognize when the goods are deliver, or the services are provide and are record in the income statement. Examples of revenue include sales revenue, service revenue, interest income, and rental income.
Expenses, on the other hand, are the costs incur by a business in the process of generating revenue. It’s the money that flows out of the business as a result of its operations. Expenses can be classify as either direct or indirect. Direct expenses are those that are directly related to the production of goods or services, such as raw materials, labor, and rent. Indirect expenses are those that are not directly related to the production of goods or services, such as marketing expenses, rent for administrative offices, and depreciation.
The main difference between revenues vs expenses is that revenues represent the income earned by a business, while expenses represent the costs incurred by a business in generating that income. In accounting, the difference between the revenues and the expenses is known as the net income, which is used to determine the profitability of the business. A positive net income means that the business has generated more revenues than expenses, while a negative net income means that the business has incurred more expenses than revenues.
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