What is the difference between income and gains, expenses and losses?

1. Different definitions:

Income refers to the total inflow of economic benefits that are formed in the daily activities of an enterprise and will lead to an increase in the owner's equity and are not related to the capital invested by the owner, including income from the sale of goods, income from the provision of labor services and income from the transfer of the right to use assets.

Expenses refer to the expenses incurred in the production and operation process of an enterprise.

Profit refers to the inflow of economic benefits formed by the non-routine activities of the enterprise, which are not related to the capital invested by the owner, and will cause an increase in the owner's equity.

Loss refers to the outflow of economic benefits that are formed by the non-routine activities of the enterprise and are not related to the distribution of owners' profits, which will cause a decrease in the owner's equity.

2. Different characteristics:

Revenue is generated from the day-to-day activities of the business; It is the total inflow of economic benefits that are not related to the capital invested by the owner; Income can lead to an increase in the owner's equity or a decrease in the liabilities of the business.

Expenses will eventually lead to a reduction in the economic resources of the enterprise; will reduce the ownership equity of the business; It may manifest itself as a decrease in assets or an increase in liabilities, or both.

Gains and losses are accounting for gains and losses that are directly included in owners' equity or gains and losses that are directly included in profit or loss for the current period.

3. The confirmation conditions are different

Revenue recognition: The business has transferred the main risks and rewards of ownership of goods to the buyer. The enterprise does not retain the right to continue management, which is usually associated with ownership, nor does it exercise control over the goods sold.

The economic benefits associated with the transaction are likely to flow into the business. The associated revenues and costs can be reliably measured.

Expense recognition: The economic benefits associated with the expense are likely to flow out of the enterprise; The outflow of economic benefits out of the enterprise will lead to a decrease in assets or an increase in liabilities; The outflow of economic benefits can be reliably measured.

Recognition of gains and losses: Gains and losses have nothing to do with investors' investment and distribution, but are part of the income from business activities of the enterprise, and together with income and expenses, they constitute the total profit of the enterprise.

4. The impact on the owner's equity is different

Gains and losses can result in changes in owners' equity, both direct (directly included in owners' equity) and indirect changes (included in current profit or loss and then affected by owners' equity).

Income and expenses only result in indirect changes in owners' equity (included in profit or loss for the period and then affected by owners' equity).

Income is a general term, and the profit is minus the cost.

1. Gains and losses are defined differently. Gain refers to the inflow of economic benefits formed by the non-routine activities of the enterprise that will lead to an increase in the owner's equity and are not related to the owner's capital investment, and loss refers to the outflow of economic benefits that occur from the non-routine activities of the enterprise and will lead to a decrease in the owner's equity and have nothing to do with the distribution of profits to the owner;

2. Income and expenses are defined differently. Income refers to the total inflow of economic benefits formed by the enterprise in its daily activities that will lead to an increase in the owner's equity and are not related to the owner's capital investment, and expenses refer to the total outflow of economic benefits incurred by the enterprise in its daily activities that will lead to a decrease in the owner's equity and are not related to the distribution of profits to the owner;

3. Analysis of conceptual differences. Gains and losses emphasize "non-or" daily activities, while income and expenses arise from daily activities.

Gains or losses include: Gains or losses included in the current profit include businesses such as: inventory losses, extraordinary losses, public welfare donation expenses, inventory profits, subsidies, donation gains, gains or losses from the disposal of non-current assets, gains or losses from the exchange of non-monetary assets, gains or losses from debt restructuring, etc.

Generally, the gains or losses included in the current profit are accounted for by the accounts of "non-operating income" and "non-operating expenses".

Income refers to the total inflow of economic benefits generated by the enterprise in its daily activities, which will lead to an increase in the owner's equity and are not related to the capital invested by the owner. Expenses refer to the total outflow of economic benefits incurred by the enterprise in the course of its daily activities, which will lead to a decrease in the owner's equity and are not related to the distribution of profits to the owners. Expenses include costs (operating costs, other business costs, and business taxes and surcharges) and period expenses (administrative expenses, selling expenses, and finance expenses).

At a minimum, the following conditions shall be met for the confirmation of expenses:

1. The economic benefits related to the cost should be likely to flow out of the enterprise;

2. The result of the outflow of economic benefits from the enterprise will lead to a decrease in assets or an increase in liabilities;

3. The outflow of economic benefits can be reliably measured.

Difference between income and profit: Income refers to the total inflow of economic benefits formed by the enterprise in its daily activities, which will lead to an increase in the equity of the owners and are not related to the capital invested by the owner. Profit refers to the rapid inflow of economic benefits formed by the non-routine activities of the enterprise, which will lead to an increase in the owner's equity and have nothing to do with the capital invested by the owner.

Income is formed by the daily activities of the enterprise, while profits are formed by the non-daily activities of the enterprise, which is the essential difference between the two. Difference Between Expense and Loss: Expenses are related to daily activities, whereas losses are related to non-routine activities.

The cost is the total outflow of economic benefits, and the loss is the net outflow of economic benefits.

The connection and difference of income and loss of expenses: income refers to the total inflow of economic interests that are not related to the owner's capital investment formed in the daily activities (key points) of the enterprise in Yinhong, which will lead to the increase of the owner's equity. Expenses refer to the total outflow of economic benefits incurred by the enterprise in its daily activities (key points) that will lead to a decrease in the owner's equity and are not related to the distribution of profits to the owners of the company.

According to the provisions of the Accounting Standards for Business Enterprises - Basic Standards:

Profit refers to the inflow of economic benefits that are formed by the non-routine activities of the enterprise and will lead to an increase in the owner's equity, and are not related to the capital invested by the owner.

Loss refers to the outflow of economic benefits that occur as a result of the non-routine activities of the enterprise and that result in a decrease in the owner's equity and are not related to the distribution of profits to the owner.

From this definition, we can summarize the three characteristics of gains and losses, namely:

1. Formed by non-daily activities;

2. It will lead to changes in owners' equity;

3. It has nothing to do with the owner's investment of capital or the distribution of profits to the owner.

Enterprises exist because investors expect to seek economic benefits through the establishment and operation of the enterprise. In other words, the business is for profit. How to measure whether an enterprise is profitable and how much it is profitable, the only indicator is the profit and loss (i.e., profit, the same below) realized by the enterprise.

However, in real economic life, in addition to the profit and loss caused by daily business activities, non-daily activities or the results of non-subjective and unexpected activities that can be controlled by the enterprise can also bring about an increase or decrease in economic benefits for the enterprise.

Therefore, since "gains and losses" are components of profit and loss, it is natural that the capital invested by investors in the enterprise and the profits distributed by the enterprise to investors should be excluded, otherwise, when the investor invests capital, although the enterprise has not used the capital for operation, it has already "made a profit", obviously, this judgment or conclusion is not in line with common sense. On the contrary, when a company distributes profits to investors, although the company is able to distribute profits to investors because of profits, it becomes a "loss" because of the profit distribution, and obviously, this kind of judgment or conclusion is also unscientific.

Therefore, "gains and losses" must exclude "the owner's investment of capital or the distribution of profits to the owner". Since "the owner invests capital or distributes profits to the owners" meets both the first two characteristics of "gains and losses", then "gains and losses" must have the third characteristic mentioned above in order to clearly define the conceptual category of "gains and losses" and clearly distinguish them from "the owners invest capital or distribute profits to the owners".

When there is income, the main business income account is credited, according to profit = income - expenses, income increases, profit increases, and owner's equity increases.

When there is an expense, the main business expense or expense account is borrowed, and according to profit = income - expense, the expense increases, the profit decreases, and the owner's equity decreases.

Income and expenses refer to the daily production and operation activities of an enterprise.

Gains and losses are not generated by the daily production and operation activities of the enterprise, that is, they do not occur daily or frequently, and are unpredictable.

This is the main difference.

Gains and losses mainly include: disposal of non-current assets, exchange of non-monetary assets, debt restructuring, subsidies, profits and losses, donations, etc.

According to the book, total profit = operating profit + non-operating income and expenditure + investment income.

However, I have seen some listed companies, its investment income is very high, even higher than its operating profit, but its total profit is about the same as operating profit! Why? For example, S Semaoda.

Thank you in advance, teachers!