income

Definition:

1. An amount of money, or other valuable benefits, received or expected to be received by an accounting entity, either from its usual activities or from other sources, apart from contributions of capital to the entity, loans made to the entity, and capital receipts. In America, it is usual to use the term ‘income’ for a net amount after deduction of some or all of the expenses of obtaining the income, but this restriction is not so commonly observed in Britain. The distinction between capital receipts and income is of great importance in taxation since the two kinds of receipts are subject to different tax rules. For a business entity the main mark of distinction is that a capital receipt is a receipt of money for the sale of a fixed asset rather than a current asset. In other contexts, an analogy is sometimes drawn with a tree and its fruit: capital is represented by the tree and income by the fruit so that sale of an income-producing asset involves a capital receipt whereas the produce of an asset is income.2. In the International Accounting Standards Committee’s Framework for the Preparation and Presentation of Financial Statements: ‘Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants’. In this sense, income includes both gains and revenues.



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