Solution 3.2

Distinguish between revenues and expenses with examples  

Revenue is the income generated by the business from the sale (both cash and on credit) of its products or services.  Revenue does not include any monies received by means of loans or cash received from selling fixed assets (balance sheet transactions).  

Expenses are the costs incurred in running the business on a day to day basis.  Expenses do not include the cost of purchasing fixed assets, or repayment of any loans.  

Revenue is money coming into to the business (an example being rent received from a tenant) while expenses represents money going out of the business (examples include electricity, wages and telephone costs).