Income - What are they? types, examples, and more

Income - What are they? types, examples, and more
Posted on 09-03-2022

Income

Entries of economic resources.

What is income?

Revenues are the inflows of economic resources generated in sales operations of a good or remuneration when providing a service.

From the accounting point of view, income corresponds to the increase in economic resources that come from business operations of an individual or a company, whether in cash or also in collection commitments, and that produces an increase in assets or decrease in passive.

In a partnership, income is considered as the increase in net worth, with the exception of contributions by partners, which are not considered income.

types of income

The main types of income are detailed below:

  • According to their relationship with the economic activity of the company:
    • Operating income: the amount of money from the main economic activities of a company. These serve as indicators of profitability since they show the possible income in the future.
    • Non-Operating Income – Amount of income that does not come from the main activities of a company. These are recorded separately from operating income.
    • Financial income: the amount of money from income or financial operations.
  • According to the validity :
    • Income of the validity or of the period: that income that is imputed within the validity of a period. This type of income is used to determine the result of the exercise of a period.
    • Earnings from prior periods or terms: correspond to revenue originating from results from prior terms or periods. This type of income is accounted for as an increase in net worth.
  • According to the origin :
    • Income from the provision of a service: that type of income generated by providing a service. The amount of income that can be generated generally depends on factors such as the activity to be carried out, the time spent, the company or place where the service is provided, and the capabilities of the individual.
    • Income from the sale of a good: that type of income resulting from the sale of goods.
  • According to the sector :
    • Income in the public sector: income of money that belongs to government organizations or to the State itself. Generally, these incomes come from the collection of taxes or from the income of companies when providing a public service.
    • Income in the private sector: that type of income obtained by individuals belonging to the private sector, such as non-governmental companies, families, individuals.
  • According to other income :
    • Passive income: income of money that enters constantly without requiring the direct or permanent intervention of the individual. This type of income includes the economic resources obtained, for example through investments in the stock market, property rentals, sale of intellectual property, etc.

Income Examples

Some examples of situations in which income is generated are listed below:

  • The rent or lease of a house.
  • The collection of taxes provides the State with a source of income.
  • The sale of intellectual property.
  • Sale of goods, products, and inventories.
  • An investment in the stock market can generate income when the value of its listing increases.
  • The interests of a bank account or a fixed term.
  • Stock dividend income.

 

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