Which statement best distinguishes revenue from gains?

• A. Revenue is from core operations; gains are incidental to core operations.
• B. Revenue and gains both increase equity equally.
• C. Gains are from core operations; revenue is incidental.
• D. Revenue decreases equity.

Answer: (A)

Revenue comes from the business’s main activities—selling goods or providing services. Gains, on the other hand, come from peripheral or incidental transactions, such as selling an asset for more than its book value, and aren’t part of the core operations. So the statement that revenue arises from core operations while gains are incidental to those operations captures the essential difference. The other ideas mix up where revenue and gains come from or how they affect equity (revenue, like gains, increases net income and thus equity; but gains are not from core operations, and revenue isn’t something that decreases equity).