Question

Distinguish between expenditure and expense; Profit and Gain.

Answer 1

An expenditure is a payment or disbursement. The expenditure may be for the purchase of an asset, a reduction of a liability, a distribution to the owners, or it could be an expense. For instance, an expenditure to eliminate a liability is not an expense, while expenditures for advertising, salaries, etc. will likely be recorded immediately as expenses.

An expense is reported on the income statement. An expense is a cost that has expired, was used up, or was necessary in order to earn the revenues during the time period indicated in the heading of the income statement. For example, the cost of the goods that were sold during the period are considered to be expenses along with other expenses such as advertising, salaries, interest, commissions, rent, and so on.

Profit: Income derived from the regular business activity, by deploying caplital labour and time.In other words it is the return on the capital employed after deducting all working capital and fixed expenses.usually appears on the liabilities side of the balance sheet.

Gain: Income derived on investment over a period of time time not falling under regular business activity.it is the return derived on investment.