Which of the following is a category of expenses?

• A. Revenue
• B. Cost of goods sold
• C. Assets
• D. Equity

Answer: (B)

In accounting, expenses are costs incurred to earn revenue. The cost of goods sold is the category that captures the direct costs tied to producing or purchasing goods that were actually sold during the period. It sits on the income statement as an expense and reduces gross profit, since gross profit equals revenue minus COGS. Revenue is money earned from sales, not an expense. Assets are resources owned by the company and appear on the balance sheet, not on the income statement. Equity represents the owners’ claim on assets after liabilities, also a balance-sheet item. So, when identifying a category of expenses, the cost of goods sold is the correct choice because it represents the direct costs of the goods sold.