What is income?

What Does Entry Mean

We explain what income is and the types of income that exist. In addition, its definition in different areas such as accounting and economics.

Income is the increase in economic resources.

What is income?

Income is the increase in economic resources presented by an organization , a person or an accounting system, and which constitutes an increase in their net worth. This term is used with similar technical meanings in different areas of economic and administrative work.

 

For example, the total that a company receives from the sale of its products is called income (in English revenue ), but also the total of the income received by the citizens of a nation is called equal (in English income ).

Depending on the specific meaning, income can be a variable considered when measuring economic and financial performance, or when designing accounting and administrative plans.

Types of income

Income can be classified into different categories, such as:

  • Public revenue. Those that the State or its various agencies receive from taxes and other collection mechanisms.
  • Private income. Those that concern private companies or private groups, whether or not they are for profit.
  • Ordinary income. Those that are obtained in a customary way, that is, habitual, such as wages and regular payments.
  • Extraordinary income. Those from events or unforeseen or unexpected events, such as the issuance of bonds of a government or winning the lottery.
  • Total revenue. The sum of what is received by an organization or a company due to its regular commercial activity, that is, when selling all its products or services .
  • Marginal income. In microeconomics , this is the name given to the increase in the total sale of a sector, when one more unit is positioned than expected.
  • Average income. An indicator obtained from the average of the products sold, that is, the total income among the total units sold.

It can help you: Financial statements

Entry into accounting

In accounting, a distinction is made between income from the sale of goods or from the provision of services.

Business accounting views income as the increase in the net worth of a company , either due to the increase in the value of its assets (increased profits , for example), or due to the decrease in its liabilities (such as the maturity of a debt. ).

In this calculation, the contributions of partners and owners are not considered, however, since these must eventually return to the hands of investors.

Usually a distinction is made between income from the sale of goods or from the provision of services. However, whether or not the income is monetary, they are framed in the same calculation of consumption and profit.

Entry into economics

In economics, income is the total earnings of an entity.

Income in economics is equivalent to the total earnings that an entity receives in the budget , be it public, private, individual or group. It is one of the essential elements in any economic evaluation, whether monetary or not, the result of the consumption-profit circuit.

The presence and nature of income in a society are part of the elements that characterize the social, political and cultural relations that it presents, since they have an impact on the quality of life and economic stability.

In addition, they can be reinjected into the economic circuit , generating dynamism and movement in the economic system, all of which often translate into growth.

Income and expenses

Expenditures are the capital outflow that the organization must make.

Income and expenses are opposite terms. Said opposition is based on the fact that the income is linked to the entry of capital into an organization or system, the result of its profits and its economic activity; while expenditures point to the opposite process: the outflow of capital or money disbursements that the organization must make, but which translate into loss or decrease in net worth.

In other words, regular payments and investments are not considered expenses , since they are part of the ordinary productive circuit and must return at the end of the cycle. Instead, extraordinary payments and monetary losses or not, must be recorded as an expense.

Per capita income

The per capita income calculates the income of the inhabitants in relation to the national income.

Per capita income (income per head) is an indicator that consists of calculating the income of each of the inhabitants, their families , companies, organizations, etc., in relation to national income and therefore to the quality of life and the level of consumption in that society . It is usually calculated according to the following formula:

Per capita income = National income (IN) / Total population (PT)

Per capita income is often used to establish economic comparisons between countries or regions , and thus establish the rate of progress of a country with respect to its neighbors or peers.

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