Answer
In a service-oriented business, expenses are operating costs while revenue is service fees paid/service revenues. On the other hand, in a merchandising company, expenses include operating expenses and cost of goods sold while revenues/income are sales revenues.
Work Step by Step
Thus, for a merchandising company, we have the cost of goods sold as part of the expense. For instance, if you buy a shoe for $5 and sell it for $8, the $5 will be part of your expenses (in the cost of goods sold).
