What is Income?

Definition: Income is the revenue a business earns from selling its goods and services or the money an individual receives in compensation for his or her labor, services, or investments. Businesses report this figure on the income statement whereas individuals report theirs on the form 1040.

What Does Income Mean?

What is the definition of income? The accounting profession is similar to other professions where words have many different meanings depending on the context. Income is used in the accounting profession to mean several different things.

One meaning of income refers to revenue or sales. Revenue is the money that a company receives from selling goods or services throughout the course of business. Revenue is an equity account that has a credit balance. Throughout the year sales are recorded in the revenue accounts and posted to trial balance. The revenue is then reported on the first line of the income statement. This is often called gross income, total sales, or top line sales since it includes all the company income and sales before deducting expenses.

Another meaning of income refers to net income. Net income is completely different than gross income. Net income appears at the bottom of the income statement after all of the cost of goods sold and operating expenses have been subtracted out. Net income equals the total company revenues minus total company expenses. As you can see, the net income definition is much different than the revenue definition of income.

The generic term income is most commonly used to refer to net income instead of revenues. Be careful when you read examples or see problems that reference a company’s income. You’ll need to analyze the question and figure out what meaning of income the question is using. More often than not, the net income definition will be used.


Ted’s Pizzeria sells pizzas for $10 each. One of Ted’s customers orders 10 pizzas. Thus, Ted records the income by crediting the revenues account for $100 and debiting the cash account for $100.

Summary Definition

Define Income: Income means the earnings a company receives from selling services and goods to customers and returns on any investments.

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