29 May Income
What is Income?
Definition: Income refers to the money that is received for selling a good or for providing a service. It could be received by an individual or by a business and is usually subject to taxes.
What does Income mean?
It’s important to remember to check the context in which the term “income” is used. When a business organization uses the word “income” it could be referring to gross income or net income.
The terms revenue and gross income are sometimes used interchangeably. These are the amounts received against the sale of the goods and services that the organization deals in.
Net income, on the other hand, is the income after accounting for all expenses. It is the amount that the company can use to distribute as a dividend or utilize to increase its retained earnings.
At times, a company may use the term “income” without specifying whether it is referring to gross income or net income. In this situation, you will need to study the context in which the word is being used.
However, in most cases, the term “income” refers to net income and is used to convey the figure that is arrived at by deducting all expenses from the company’s revenues. Net income is also called earnings, a word that signifies a company’s profit for a specified period.
Example of Income
An individual’s income may take the form of salaries, wages, interest income, dividend income, or rental income.
A business organization may have income of the following types:
- Sales revenues from the products that the company sells or the services that it provides.
- Rental income from the property that it has leased out.
- Interest and dividend income from the company’s investments.
Income usually refers to the net income of a company. That’s the profit remaining after accounting for all expenses including interest, depreciation, and taxes.