Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What do we call the money paid out by a company to cover its operational costs?

1. Revenue

2. Receipts

3. Expenses

4. Gains

The correct answer is: Expenses

Expenses refer to the costs that a company incurs during its operations to earn revenue. These can include salaries, rent, utilities, materials, and other necessary expenditures required to maintain business activities and ensure smooth operations. In accounting terms, expenses are recorded on the income statement, and they are subtracted from total revenue to determine the company's profit or loss for a given period. Revenue represents the total income generated from business activities before any expenses are deducted. Receipts typically refer to the actual cash inflow from sales or services, while gains arise from other transactions that are not part of normal operations, such as the sale of an asset for more than its book value. Understanding these terms is important for grasping financial statements and the overall financial health of a business.