Accounting - Revenue and Expenses

Question 1

What is Revenue?

Answer 1

An increase in Assets or reduction in Liabilities that leads to an increase in owner’s equity.

Question 2

What does Revenue occur from?

Answer 2

Revenue occurs from ordinary activities of the business and includes items such as sales, fees, interest, dividends, royalties and rent.

Question 3

What does Revenue represent?

Answer 3

Represents the increase in owner’s equity that occurs through business activities, and in most cases will be what the business has earned from the service that is has provided.

Question 4

What is an Expense?

Answer 4

A decrease in assets or increase in Liabilities that lead to a decrease in owner’s equity.

Question 5

What can expense occur from?

Answer 5

Things like loss on sale of disposal of a non-current asset or inventory loss, as well as things like costs of materials used, wages, depreciation and advertising

Question 6

What else does expense refer to?

Answer 6

It also refers to what the business has consumed to earn revenue. Drawing by the owner are therefore not included.