Income

Income

Income is gross inflow of Income benefit which would increase the equity of the company other than equity contribution by the equity holders. The direct contribution in equity and payments from the equity are charged directly to equity account.

Examples of Income

a)    Revenue.

b)   Rental income.

c)    Dividend income.

d)   Interest income.

e)    Royalties’ income.

Recognition of Income

Incomes are recognized in the books of account subject to fulfillment of following conditions.

a)    An item qualifies the definition of income.

b)   Income can be measured reliably.

c)    Economic benefit shall flow to the organization.

Recording Rules of Income

Increase in income is debited, while decrease in income is credited in the books of account. This rule has been explained with an example

a)    Sales made in cash of 70,000

b)   Rent received in cash 120,000.

Sales made shall be credited being increase in income, while cash received shall be debited being increase in asset.

Date	Particular	Folio	Dr.	Cr.
	Cash A/c		70,000
	Sales A/c			70,000

Rent being income or increase in income is credited, while cash is debited being increase in assets.

Date	Particular	Folio	Dr.	Cr.
	Cash A/c		120,000
	Rent A/c			120,000

Income & Profit

Income is gross inflow of economic benefit, while profit is net inflow of economic benefit. The net income is calculated by deducting the related expenses incurred for the generation of income.