From the course: Accounting Foundations: Bookkeeping

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Including revenues, expenses, and dividends

Including revenues, expenses, and dividends

From the course: Accounting Foundations: Bookkeeping

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Including revenues, expenses, and dividends

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- Now at this point, we must bring revenues and expenses into the picture. Obviously, they're going to be a part of every ongoing business. Recall from our discussion of the income statement that resources provide resource inflows. They are increases in resources from the sale of goods or services. Expenses represent resource outflows, they are costs incurred in generating revenues. Note that revenues are not synonymous with cash or other assets, but are a way of describing where the assets came from. For example, cash received from the sale of a product is recorded as the asset Cash, but the source of the asset would be considered revenue. In contrast, cash received by borrowing from the bank would not be revenue, but an increase and a liability. By the same token, expenses are a way of describing how an asset has been used. Thus, cash paid for interest on a loan is an expense, but cash paid to buy a building represents the exchange of one asset for another. So, how do revenues and…

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