income

(noun)

In U.S. business and financial accounting, the term "income" is also synonymous with revenue; however, many people use it as shorthand for net income, which is the amount of money that a company earns after covering all of its costs.

Related Terms

Examples of income in the following topics:

  • Introduction to the Income Statement

    • The income statement shows revenues and expenses for a specific period.
    • The income statement is prepared on an accrual basis.
    • There are two types of income statement, a single-step income statement and a multi-step income statement.
    • The multi-step income statement is more complex.
    • When combined with income from operations, this yields income before taxes.

  • Preparation of the Statement of Cash Flows: Indirect Method

    • This leaves us with the amount of $9,000 for net income.
    • The indirect method adjusts net income (rather than adjusting individual items in the income statement) for:
    • An increase in an asset account is subtracted from net income, and an increase in a liability account is added back to net income.
    • This leaves us with the amount of $9,000 for net income.
    • The indirect method adjusts net income (rather than adjusting individual items in the income statement).

  • Income Statement Formats

    • In the multiple-step format revenues are often presented in great detail, cost of goods sold is subtracted to show gross profit, operating expenses are separated from other expenses, and operating income is separated from other income.
    • The income statement is used to assess profitability, as the expenses for the period are deducted from the revenues.
    • When net income is positive, it is a called profit.
    • Net income increases when assets increase relative to liabilities.
    • Thus, the balance sheet has a direct relation with the income statement.

  • Overview of Income Tax Accounting

    • Also, the actual amount of tax liability due to the IRS may not be the same as the income tax expense reported on the income statement.
    • Temporary difference: The book income (income shown on the company financials) may be higher one year, but lower in future years.
    • The deferred method is an income-statement-oriented approach.
    • This allows the company to deduct the loss against future taxable income.
    • Reporting income tax is complicated by the fact that IRS code differs from generally accepted accounting principles

  • Operating Expenses, Non-Operating Expenses, and Net Income

    • Operating expenses and non operating expenses are deducted from revenue to yield net income.
    • Non operating expenses include loan payments, depreciation, and income taxes.
    • When net income is positive, it is called profit.
    • Net income increases when assets increase relative to liabilities.
    • Operating expenses, non operating expenses and net income are three key areas of the income statement.

  • Relationships Between Statements

    • If revenue exceeds expenses for the period then a net income occurs.
    • The income statement, specifically, net income reconciles the beginning (prior ending period) balance sheet to the current balance sheet.
    • That is, the net change in the balance sheet accounts will not equal net income.
    • The difference is comprehensive income.
    • Comprehensive income is reported on the statement of changes in shareholder's equity.

  • Introduction to the Retained Earning Statement

    • GAAP) requires a statement of retained earnings to be prepared whenever comparative balance sheets and income statements are presented.
    • Comprehensive income is the sum of net income and other items that must bypass the income statement because they have not been realized, including items like an unrealized holding gain or loss from available for sale securities and foreign currency translation gains or losses.
    • These items are not part of net income, yet are important enough to be included in comprehensive income, giving the user a bigger, more comprehensive picture of the organization as a whole.Items included in comprehensive income, but not net income are reported under the accumulated other comprehensive income section of shareholder's equity.
    • The statement of shareholder's equity uses information from the income statement and provides information to the balance sheet.
    • The statement of retained earnings uses information from the income statement and provides information to the balance sheet.

  • Special Reporting

    • Special, or irregular, items appear on single step or multi-step income statements, and require special reporting procedures.
    • The earnings per share can appear on the income statement or in the notes to the income statement.
    • Earnings per share are calculated as net income, with preferred dividends/weighted number of shares outstanding.
    • GAAP) whenever comparative balance sheets and income statements are presented.
    • Intraperiod Tax Allocation: With intraperiod tax allocation, the specific item (or items) that generated the income tax expense are shown on the income statement with the applicable tax amount applied.

  • Revenue

    • Revenue refers to the mechanism by which income enters a company.
    • Revenue refers to the receipt of monetary value from the sale of goods or services and other income generating activities.
    • In U.S. business and financial accounting, the term "income" is also synonymous with revenue; however, many people use it as shorthand for net income, which is the amount of money that a company earns after covering all of its costs (which is not the same as revenue).
    • Common income accounts are operating revenue, dividends, interest, and gains.
    • The same idea holds for revenue and incoming cash flows.

  • Cost of Buildings

    • Unlike land, buildings are subject to depreciation or the periodic reduction of value in the asset that is expensed on the income statement and reduces income.
    • They also can incur substantial maintenance costs, which are expensed on the income statement and reduce an accounting period's income.
    • If the sale results in a gain, the excess received over the building's net book value is disclosed on the income statement as an increase to the accounting period's income.
    • If the sale results in a loss and the business receives less than book value, the loss is also disclosed on the income statement as a decrease to income.