Question

How does the finance concept of gross income and operating expenses differ from those studied in accounting. Which is the correct definition.

Answer 1

As per the Accounting concept, a company’s gross income is found on the income statement, and it is generated from all income subtracting from the firm’s cost of goods sold.

Gross Income = Income(revenue) - Cost of goods sold

As per the Finance concept, Gross profit or Gross income is an important item in a company's income statement. The company’s profit for the current year before deducting any expenses and taxes.

As per accounting, Operating expenses are those unrelated to producing a product. It can be found by subtracting operating income from gross profit.

As per finance, the company’s management will look to maximize profits because profits are determined by the company-generated revenue and the amount spent to operate daily. Income statement profit can be increased by increasing revenue and decreasing operating costs, but cost-cutting is easier to increase profits. So it helps the company to make decisions on better operation.