Similarities & Differences Between Sales And Expenses With Relationship

Sales is the price of goods sold or services rendered to customers while Expenses are incurred for the purpose of earning Revenues for the business.

Sales is a Direct Revenue for the business as it is earned from the main source of revenues of the business while Expenses may or may not be related to cost of production. So, Expenses are considered as Direct Expenses and Indirect Expenses.

Sales is recorded in the Income Statement in order to calculate Cost of Goods Sold / Cost of Sales while only direct expenses are incurred in the cost of production.

Similarities Between Sales And Expenses

Both are Temporary Accounts which are finally transferred to Income Statement.

Both are necessary to carry on the business. For example, if the business does not generate sales, then the business will be shut down at the end while at the same time, the expenses such as Sales Discount, Commission Expenses, etc., are also incurred to earn revenues in the form of sales.

Relationship Between Sales And Expenses

There is a Strong Relationship exists between Sales and Expenses as Expenses are incurred to earn revenues (Sales) for the business. The general rules is that the more expenses the business incurred effectively, the more sales will be made. For Instance, a company may pay highly competitive package to motivate skilled sales manager to increase sales for the business.