Analysis of Revenues and Expenses Since Profit equals Revenues less Expenses, to determine what your profit is, you must first identify all revenues and expenses for the period under study. Yes or No For accounting purposes firms generally use a twelve month period, such as January 1 to December 31 or July 1 to June 30. The selection depends upon the nature of your business, your personal preference, or possible tax considerations.
Expenses are the cost of goods sold and services used in the process of selling goods or services.
There are, of course, many other types of expenses, but the point is that every expense must be recorded and deducted from your revenues before you know what your profit is. Understanding your expenses is the first step toward controlling them and increasing your profit.