Similarities & Differences Between Expenses And Revenues

Expenses are the costs of producing goods, products or services while Revenues are the price of goods sold or services rendered to the customers of the business.

There are two types / kinds of expenses. One type is Direct Expenses and second one is Indirect Expenses. Revenues are also divided into two types. One is Direct Revenues and the other one is Indirect Revenues.

Expenses have normal or usual balance on debit side which is finally closed at the end of the accounting period as these are Temporary Accounts while revenues have credit favorable balance on a ledger account which is finally closed to Income Summary Account.

If expenses are more than revenues, then the business suffers loss and if revenues are more than expenses, then the business gains or earns profit for the accounting period.feed

In an Accounting Equation, expenses are deducted from Owner’s Equity while revenues are added to owner’s Equity as these are the profitable activities of the owners of the business.

Revenue is the opposite of expenses and expense is the opposite of revenues / incomes.

Similarities Between Expenses And Revenues

Both are Temporary Accounts which are closed at the end of the accounting period.

Both are used to prepare Income Statement for the period.