Chapter 3 - The Accounting Information System - Review and Practice - Questions - Page 127: 9

Revenues are equivalent to the total amount received from the net sales made by the merchandising company. Comparatively, expenses are the amount incurred in administrative and selling activities conducted by a merchandising company. The measurement of income begins with the determination of gross profit. The total cost of goods sold is deducted from the total net sales to obtain the gross profit. Next, selling expenses are deducted. Then, the total administrative expenses are deducted to derive the income from operations. Other sources of revenue are added to the income from operations. Eventually, other losses and expenses are deducted to obtain income, which is then subjected to taxation.

Revenues are equivalent to the total amount received from the net sales made by the merchandising company. Comparatively, expenses are the amount incurred in administrative and selling activities conducted by a merchandising company. The measurement of income begins with the determination of gross profit. The total cost of goods sold is deducted from the total net sales to obtain the gross profit. Next, selling expenses are deducted. Then, the total administrative expenses are deducted to derive the income from operations. Other sources of revenue are added to the income from operations. Eventually, other losses and expenses are deducted to obtain income, which is then subjected to taxation.