Final answer:
The similarity between revenues and gains is that both increase equity, whereas the difference lies in the fact that revenues come from the company's main operations, while gains are results of incidental transactions. Stakeholders must understand this distinction because it affects the analysis of a company's core operating performance and long-term viability.
Step-by-step explanation:
The question relates to the similarity and difference between revenues and gains, and understanding why the distinction between these two concepts is essential to stakeholders. The correct answer is: a) Similarity: Both increase equity; Difference: Gains result from incidental transactions.
It is crucial to recognize that revenues are the income a business earns from its normal business operations, such as sales of goods or services. On the other hand, gains are increases in equity from peripheral or incidental transactions, which are not related to the core business activities, like the sale of an asset for more than its carrying amount.
The distinction between revenues and gains is significant to stakeholders because it affects the evaluation of the company's operating performance. While both increases equity, only revenues arise from the principal activities defining the company's business. Gains may inflate the company's income but are not sustainable or predictable as revenues.