Difference Between Income and Expense

by Marquis Codjia; Reviewed by Jayne Thompson, LLB, LLM; Updated February 12, 2019

The difference between income and expenses is simple: income is the money your business takes in and expenses are what it spends money on. Your net income is generally your revenue, or all the money coming into your business, minus all of your expenses. If that number is positive, your business is making a profit.


  • Income and expenses are opposing numbers. Income represents the money you have coming into your business while expenses are all the bills you have to pay.

Exploring Business Income

Income is money a business makes by selling merchandise, providing services or both. Add to that any activity – temporary or permanent – the company undertakes to generate revenue and bring in money.

Income could come from steady activities like a store or factory selling goods, or a hotel or advertising agency offering services. It could also come from one-off items like the sale of real estate no longer needed by a company or the sale of securities owned by a company.

Income is typically spelled out in detail on a financial statement called the income statement. This will often distinguish between operating revenues from core business activities, non-operating revenues from things like interest and rents on extra office space in a company's building, and gains from one-time sales of various assets other than ordinary sale goods. If you're tracking a business's performance or considering an investment, you might want to distinguish between these to understand what's a one-off source of income versus steady sources of funds.

Understanding Business Expenses

Investors don't appreciate it when a business owner skirts the issue of expense management. This is because financiers know that proper cost management goes a long way toward easing the concerns of lenders, reassuring vendors about solvency and producing a positive income statement.

Expenses range from salaries and office supplies to shipping, regulatory fines, litigation and cost of goods sold – also referred to as material expense or cost of sale. As with income, there can be expenses directly tied to operations, such as the cost of goods sold or the wages paid to employees, other recurring expenses such as rent and interest on loans, and then one-off costs such as legal settlements or losses on investments.

Some costs like depreciation, amortization and depletion don't involve direct cash payments, though. Depreciation and amortization are techniques for spacing the cost of materials, tools, buildings and the like over their natural lives rather than recording them as expenses in the year they're acquired. Depletion is a similar accounting tool usually dealing with shrinking stockpiles of material resources, such as mines or oil wells.

Expenditure Vs. Expense

Expenditure and expense are sometimes used informally to mean similar things, but they have slightly separate meanings in finance.

An expenditure refers to an actual outflow of cash, such as to purchase something or pay for a service, while expense refers to a cost that may not all be paid at once. A long-term expense, such as a mortgage or payments on a lease, could involve many expenditures over time.

Income vs. Expenses

Income items connect with operating expenses through a corporate income statement, although both concepts are distinct. An income statement is the report you review to determine what's going on in a company's records on the profitability front.

If you own a business, combing through the corporate income sheet keeps you abreast of operating developments, enabling you to weigh in on everything from marketing and sales strategy to operational tactics, expense management, product branding and financing.

Related Communication Strategy

Discussing income and expense items often calls for analytical dexterity as well as measured and targeted communication. A company must be able to deliver news about its performance during a given period - say, a month or fiscal quarter - without divulging sensitive, confidential data.

For example, the business may want to publish income and expense information in its income statement without telling readers – and rivals, for that matter – how it goes about increasing revenue, reducing expenses and maintaining a positive profitability status over time.

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