Question

11. Revenuen, gains, and investments by Owners are all increases in net assets What are the distinctions among them?

Answer 1

1. Investments by owners differ from revenues and gains in that they represent transfers by owners to the entity, and they do not arise from activities intended to produce income.
2. Revenues differ from gains in that they arise from the entity's ongoing major or central operations. Revenue is the amount earned from a company's main operating activities, such as a retailer selling merchandise or a law firm providing legal services.
3. Gains arise from peripheral or incidental transactions.In accounting, a gain is the result of a peripheral activity, such as a retailer selling one of its old delivery trucks. A gain occurs when the cash amount (or its equivalent) received is greater than the asset's carrying amount, which is also referred to as the asset's book value. For example, if the company receives $3,000 for the old delivery truck, and the truck's carry amount (book value) at the time of the sale was $600, the company will have a gain of $2,400.