Most companies include revenues, gains, expenses and losses in their income statements. Though some of the terms sound similar, there are different uses for gains and losses, as well as for revenues and expenses. Take a look at each combination of terms and how they differ. Ultimately, businesses look to maximize gains and revenues while minimizing expenses and losses. They all affect overall profitability.
Gains and Losses
Gains and losses are the opposite financial results occurring through a company's nonprimary operations and production processes. Any time a company produces profit or realizes increased value through secondary sources, such as lawsuits, investments or disposal of assets, it is called a gain. Conversely, a loss is realized whenever a company loses money through secondary activity. If a company sells an asset, the determination of gain versus loss is dependent on the book value of the asset according to the company's financial documents.
Revenues and Expenses
Unlike gains and losses, revenues and expenses are not opposite financial results of the same activities. Rather, revenue is the term used to describe income earned through the provision of a business' primary goods or services, while expense is the term for a cost incurred in the process of producing or offering a primary business operation.
Of the four terms being considered, expenses are the most diverse. Expenses can be related to a multitude of different costs, such as labor, advertising, rent, insurance, interest, depreciation and amortization, and can be recorded into any number of different line items on an income statement.