In relation to income, revenue and expenses, which of the following statements is incorrect?
A) Revenue is the inflows from ordinary activities while income is revenue plus all gains.
B) The difference between revenue and cost of goods sold (i.e. cost of sales) is referred to as gross profit (loss).
C) Income and expenses do not impact the equation Assets = Liabilities + Owners' Equity.
D) Income increases equity while expenses decrease it.

Question

Quizplus · Accepted Answer

Income and expenses impact the equation Assets = Liabilities + Owners' Equity. Income increases equity, while expenses decrease it, which means that the equation must be adjusted to reflect the change in equity. For example, if a company makes a profit of $10,000 in one year, its equity will increase by $10,000, and the owner's equity section of the balance sheet must be adjusted accordingly. Similarly, if the company incurs expenses of $5,000, its equity will decrease by $5,000, and the owner's equity section of the balance sheet must be adjusted accordingly.

In Relation to Income, Revenue and Expenses, Which of the Following