The term of Loss and expenses are opposite to each other But normally these terms are used interchangeably, which is wrong. So, to know the Difference Between Loss and Expense, First of all, we have to clear the meaning of both terms. These are explained below:
Meaning of Loss: –
The amount that is left after the deduction of total expenses from the total revenue of the particular period. The losses can be subcategories in three types shown as following:
- Gross Loss
- Operating Loss
- Net Loss
The formula of Calculation of Profit Or loss: –
After calculation with the formula, we got values in negative then it will be known as a loss:-
“Gross Profit/Loss = Total Sales – COGS”
“Operating Profit/Loss = Gross Profit/Loss – Operating Expenses”
“Net Profit/Loss = Operating Profit/Loss – Interest – Taxes”
Examples: –
The total amount of Sale is Rs 10,00,000, COGS is Rs 6,00,000 and Operating Expenses is Rs 4,50,000,Interest on Loan Rs 20,000 in last taxes is Rs 30,000. Now calculate the amount of Gross Profit/ Loss
The formula of Calculation of Revenue: –
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“Gross Profit/Loss = Total Sales – COGS”
= 10,00,000 – 6,00,000
Gross Profit = 4,00,000
“Operating Profit/Loss = Gross Profit/Loss – Operating Expenses”
= 4,00,000 – 4,50,000
Operating Loss = – 50,000/-
“Net Profit/Loss = Operating Profit/Loss – Interest – Taxes”
=-50,000 – 20,000 – 30,000
Net Loss = -1,00,000/-
Meaning of Expenses: –
Expenses mean the amount spent by the business for running the business operation. The expenses are also known as Revenue Expenditure. In other words, The amount spends on running the process of production and purchase of goods. The Expenses can be divided into two subcategories, these are shown as following:
- Direct Expenses
- Indirect Expenses
Details amount Expenses Please check out from the following Link:
What are Expenses – its types and examples
Chart of Difference between Losses and Expenses: –
Basis of Difference |
Losses |
Expenses |
|
Meaning |
The amount that is left after the deduction of total expenses from the total revenue of the particular period. | Expenses mean the amount spent by the business for running the business operation. The expenses are also known as Revenue Expenditure. |
|
Method of Calculation |
“Loss = Revenue – Expenses & losses” (If the amount of Expenses is more) |
Total the all expenses |
|
Dependency on Each other |
It is dependent on Expenses. if expenses more then a loss is more and vice versa. | It is not dependent on loss. |
|
Categories |
||
|
Need to calculate |
Calculation of the total amount of losses is needed to know the performance of the business | Calculation of the total amount of Expenses is needed to know the profit or losses of the business for a particular period. |
Download the chart:
If you want to download the chart please download the following image and PDF file
The conclusion of the Difference: –
The Loss of any particular period depends on low revenue and high expenses. If revenue gets by the business is less then its expenses during the particular period then this amount will be known as loss.
Thanks for reading the topic of Difference between Loss and Expense,
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Check out T.S. Grewal’s Double Entry Book Keeping (Financial Accounting)
T.S. Grewal’s Double Entry Book Keeping