What is Income? – Goods, Services and More

What is Income?

Income is monetary and non-monetary earnings, which are brought together and generate a consumption-profit central. We can differentiate between those obtained by selling a product or service.

Income from Goods and Services

It is crucial to differentiate by its origin to account for it. On the one hand, there are those coming from the sale of goods and, on the other, from providing services.

To account for income from the sale of goods:

• Firstly, Ownership of the property must have been transferred
• The company cannot continue to manage the goods sold
• The amount must value reliably
• And also, the company must receive profit from the sale
• The costs of the operation must be valued reliably
• To account for it from the provision of services:
• The service must value reliably
• The company must receive benefits from the operation
• The degree of completion of the service must be reliably assessed
• And also, he present and future costs resulting from the provision must value

What is Income In Accounting?

According to the PGC, distinguishes two types of it; those that come from the sale of goods and the second those obtained for a provision of services. To account for those from the sale of goods, there are a series of rules:

• The company does not retain the management or control of the goods sold.
• That the amount value safely.
• That the company receives the benefits of the operation.
• And also, the selling company transfers the dangers and benefits inherent in property ownership. It’s the buying company regardless of their legal transfer.

In accounting, it accounts will be born by credit, and there will only be entries in the glory with three exceptions that account 706, 708 and 709. They will have a zero credit balance and be in group 7 of the accounting plan.

Different Types of Income

Personal income: Those that affect private companies or groups and those that are for-profit or not.

Average income: An indicator obtained by the average of the items sold, the total divided by the total number of units sold.

Public income: These are those obtained by the State from taxes and other collections. Those include in the VAT Law and Personal Income Tax Law.

Extraordinary income: These come from unforeseen events, with the communication of government bonds or winning the lottery.

Ordinary income: These obtain regularly, such as salaries and regular payments.

Per capita income is an indicator that consists of an operation of each inhabitant, companies, families, etc. Its link with the national income and therefore the quality of life. And also, it’s the level of consumption of said association. If the following formula: CPI= national income/total population.

And also, it has many acceptances within accounting, but it is generally the achievement of an economic return for a service or product.

Business Income

They are increases in the net worth of the company during the year. It’s either in the form of entries or growths. And also, it the value of assets, or decreases in liabilities, provide that do not originate in contributions, monetary or not. In the partners or owners when it comes from productive activities.

Total Income

Marginal revenue: it is generated by increasing production by one unit.

Average income: it obtain, on average, for each unit of product sold; that is, its total revenue divided by whole units sold.

Marginal product income: It generates by accounting for some factor of production (labour, capital as values); for example, the use of one more worker.

Ordinary and Extraordinary Income

It can also classifies as ordinary and extraordinary. Regular income obtains habitually and customarily; for example, the salary of a worker. Its works in a stable job or a company’s sales to a client who buys periodically or regularly. Extraordinary revenues come from special events; 1, for example, un expect a business deal by a person or a bond issue by a government.

Conclusion

The amount of the sale of goods and provision of services is the object of the company’s traffic. It includes others. And also, its changes in inventories and profits for the year.

It must be done. It’s the transaction that occurs, regardless. And also, it’s whether or not they have collected. To follow the accrual criterion for its registration and not the cash criterion. Which means attending to the actual flow of goods and services and not to the money flow for its accounting.

Also Read: What is Currency? – History,  Uses, and More