Archive | Income Concepts

Procedure of Computing Accounting Income: 4 Steps

The following points highlight the four main steps involved in procedure of computing accounting income. The steps are: 1. Defining the Particular Accounting Period 2. Identifying Revenues of the Accounting Period Selected 3. Identifying Costs Corresponding to Revenues Earned 4. Matching Principle. Step # 1. Defining the Particular Accounting Period: Accounting income refers to the […]

Comprehensive Income: Concept, Components and Advantages

In this article we will discuss about Comprehensive Income:- 1. Concept of Comprehensive Income 2. Components of Comprehensive Income 3. Advantages. Concept of Comprehensive Income: Comprehensive income, also known as all-inclusive concept of income, is the change in equity (net assets) of an entity during a period from transactions and other events and circumstances from […]

Top 3 Concepts of Income (With Measurement)

The following points highlight the top three concepts of income. The concepts are: 1. Accounting Income 2. Economic Income 3. Capital Maintenance Income. Concept # 1. Accounting Income: Accounting income, often referred to as business income or conventional income is measured in accordance with generally accepted accounting principles. The profit and loss account or income […]

Operating and Non-Operating Activities of Business

In this article we will discuss about operating and non-operating activities of business. Operating activities are the central means by which the enterprise is expected to obtain income and cash in the future. Results of central, continuing operations, therefore, have a different significance from results associated with other non-recurring activities and events. No definition of […]

Top 2 Approaches to Income Measurement

The following points highlight the top two approaches to income measurement. The approaches are: 1. Transactions Approach to Income Measurement 2. Activities Approach to Income Measurement. Approach # 1. Transactions Approach to Income Measurement: The transactions approach in income measurement records changes in asset and liability valuations only as these are the result of transactions. […]

Top 3 Concepts of Capital Maintenance in an Enterprise

The following points highlight the top three concepts of capital maintenance in an enterprise. The concepts are: 1. Financial Capital Maintenance 2. General Purchasing Power Financial Capital Maintenance 3. Physical or Operating Capital Maintenance. Concept # 1. Financial Capital Maintenance: Financial or money capital maintenance pertains to the original cash invested by the shareholders in the business […]

Advantages and Limitations of Accounting Income

In this article we will discuss about the advantages and limitations of accounting income. Advantages of Accounting Income: (1) Accounting concept of income has the benefit of a sound, factual and objective transaction base. Accounting income has stood the test of time and therefore is used by the universal accounting community. (2) Another argument in […]

5 Important Recipients of Net Income

The following points highlight the five important recipients of net income. The recipients are: 1. Value-Added Concept of Income 2. Enterprise Net Income 3. Net Income to Investors 4. Net Income to Shareholders 5. Net Income to Residual Equity Holders. Recipient # 1. Value-Added Concept of Income: Broadly speaking, it is possible to view the […]

Accounting Income and Economic Income

In this article we will discuss about the differences and similarities between accounting income and economic income. Difference between Accounting Income and Economic Income: The following are the differences between accounting income and economic income: 1. Accounting income is an income resulting from business transactions arising from the cash-to-cash cycle of business operations. It is […]

Limitations of Economic Income

In this article we will discuss about the limitations of economic income. Economic income has several difficulties. In fact there is no agreement as to the meaning of “better offness” that occurs in specific time periods. Also, this term is not well defined in case of business enterprises. The greatest problem lies in measuring the […]

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