What is the definition of an income?


According to the conceptual framework for financial reporting, income is defined as 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.

This definition has four key components:

  1. Increases in economic benefits: Income represents an increase in economic benefits that result from the entity's operations or other activities.
  2. Accounting period: Income is recognized in the accounting period in which it is earned, regardless of when it is received.
  3. Inflows or enhancements of assets: Income can arise from either inflows of economic resources, such as sales of goods or services, or enhancements of assets, such as increases in the value of investments or property.
  4. Increases in equity: Income results in an increase in equity, which can be in the form of retained earnings or other forms of equity.

Examples of income include revenues from the sale of goods or services, gains from the sale of assets, interest income, and rental income.

Overall, the definition of income in the conceptual framework emphasizes the importance of increases in economic benefits and their impact on equity, as well as the recognition of income in the accounting period in which it is earned.

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