Gain

Definition

Gain is the financial profit resulting from the sale of an asset or investment when its selling price exceeds its purchase price. Gains are typically recorded in the income statement and can impact both net income and equity.

5 Must Know Facts For Your Next Test

1. Gains are distinct from revenue; they arise from peripheral activities, not primary business operations.
2. Gains increase net income on the income statement.
3. They are recorded as part of other comprehensive income in some cases.
4. Gains can affect the Statement of Owner’s Equity by increasing retained earnings.
5. Unlike gains, losses occur when the selling price is less than the purchase price.

Review Questions

• What distinguishes a gain from regular revenue?
• How does a gain impact the income statement?
• In which financial statement would you find gains affecting retained earnings?

Related terms

Revenue: Money earned from primary business operations such as sales of goods or services.

Loss: The financial deficit incurred when an asset is sold for less than its purchase price.

Retained Earnings: Profits that a company has decided to keep rather than distribute to shareholders as dividends.