Did you carefully look at Income Statement?. Income statement consists of four main components such revenues, cost of revenue, expenses and operating income. Revenues is income generated by selling product or service to customers, Cost is resources are sacrificed to generate revenues. For merchandiser company, the cost is the cost of purchase of merchandise and any related cost added to make the merchandise are ready to sale. For service provider company, the cost is cost of personnel to perform the service to client and any related cost added to perform the service. For manufacturer company the cost is cost of manufacturing activities. Expense is the other type of resources sacrificed (refer to cost definition) but in different purpose. Expense is resources sacrificed to maintain and realize revenues through billing and collecting and reinvesting into manufacturing process to start the sequential manufacturing process. While operating income is net residual value generated along with business process to maintain sustainable business growth.
Cost Terminology
Updated: Aug 10, 2022
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