Question

Define revenues and expenses?

Answer 1

Revenues- Revenues refer to the amount received from day to day activities of the business, like sales proceeds of goods and rendering services to the customers.

Rent received, commission received, royalties and interest received are considered as revenue, as they are regular in nature and concerned with day to day activities.

It is shown in the credit side of the profit and loss account or trading account.

Expenses- Expenses refer to those costs that are incurred to earn revenue for the business.

It is incurred for maintaining profitability of the business.

It indicates the amount spent to meet short-term needs of the business.

It is shown in the debit side of the profit and loss account or trading account.

For example, wages, rent paid, salaries paid, outstanding wages, etc.