Revenue and Expenses: The Money Flow
Revenue is the money your business earns from its main operations - whether that's providing services, selling products, or earning professional fees. This includes service revenue, interest income, sales, and professional fees that flow into your business.
Expenses represent the costs you incur while generating that revenue. Common expenses include utilities, salaries, wages, taxes and licenses, cost of sales, and depreciation. These are the necessary costs of doing business.
Let's see this in action: when Many Integrity starts a transportation business with ₱500,000 cash investment, the accounting equation shows Assets (₱500,000 cash) = Liabilities (₱0) + Owner's Equity (₱500,000 M. Integrity, capital). Everything balances perfectly from day one.
Key Insight: Revenue increases owner's equity, while expenses decrease it - this is how businesses track whether they're making or losing money.