Income

Income is the consumption and savings opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms.

Definition

For households and individuals, income is the sum of all the wages, salaries, profits, interest payments, rents, and other forms of earnings received in a given period of time. For firms, income generally refers to net-profit that is, what remains after operating expenses, interest and taxes are subtracted from gross revenue.

Types of Income

Income can be categorized into two types:

• Active Income: This is the income earned by performing a service. This includes wages, tips, salaries, commissions, and income from businesses in which there is material participation.

• Passive Income: This is the income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it.

Income Distribution

Income distribution is how a nation’s total GDP is distributed amongst its population.

Income in Different Disciplines

In different disciplines, the term income has different meanings:

• In economics, income distribution is the smoothness or equality with which income is dealt out among members of a society.

• In personal finance, income is what is received as a wage or salary and is either consumed or saved.

• In accounting and taxation, income is the increase in wealth that an entity has from its activities.

See Also

• Gross income
• Net income
• Disposable income
• Personal income
• Household income
• Income inequality
• Income tax

References

Income Resources
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