Define revenues and expenses?
Revenues are the amounts a business earns by selling its products or providing services to customers, which is called sales revenue. Other common items of revenue include commission, interest, dividends, royalties, and rent received. Revenue is also known as income.
Expenses are the costs incurred by a business in the process of earning revenue. Generally, expenses are measured by the cost of assets consumed or services used during an accounting period. Typical examples include depreciation, rent, wages, salaries, interest, and costs for utilities like heater, light, and water.
Explanation
The answer is derived directly from sections 1.5.7 and 1.5.8 of the provided text. Section 1.5.7 defines Revenues as amounts earned from sales or services, listing examples like interest and dividends, and noting it is synonymous with income. Section 1.5.8 defines Expenses as costs incurred to earn revenue, measured by asset consumption or service usage, with examples such as depreciation and wages.
Solution Steps
Step 1: Define Revenues based on text as amounts earned from sales/services, listing examples like interest or rent.
Step 2: Define Expenses based on text as costs incurred to earn revenue, measured by asset consumption.
Step 3: Format into two clear paragraphs with key terms bolded to meet the 3-mark requirement.