What are Incomes – its types and examples

Incomes mean the amount earned by the business from the business operation and other activities. Income is also known as Revenue. In other words, The amount earned from Sale of goods and services and other non-operation works. These incomes are routine incomes and will have to receive throughout the year.

The types of Incomes :

The Incomes also can be divided into two types. These are explained as under:

1. Direct Income 
2. Indirect Income

1. Direct Income:-

The incomes which are earned from the business operational activities are known as Direct Income. In other words, income earned from the sale of that goods and services in which business is dealing. 

Why this income is separated in a different group?

Because with the help of these we can calculate the Gross profit of the business in a particular financial year.

These incomes are differed as per the model of business. We are further classified them into two major subcategories explained as follows: –

1. Physical Product Business model
2. Services Business Model

Examples: –

1. Physical Product Business model:
   1. For the Computer Parts Manufacture, the income earned from the sale of computer parts will be Direct Income of their business.
   2. For the Car Manufacture Company, the income earned from the sale of cars and sale of spare parts will be Direct Income of their business.
   3. For the Books Trader, The income earned from the sale of books will be Direct Income of their business.
2. Services Business Model:
   
   1. For the Tuition Center, The income earned from the fee charged to the students will be Direct Income of their business.
   2. For the Doctor, The income earned from the fee charged to the patient will be Direct Income of his business.

2. Indirect Expenses: 

The incomes which are earned from the non-operational activities of the business are known as Indirect Income. In other words, income earned from the sale of scrap or profit earned from the sale of any assets.

These Incomes are separated to calculate the Net profit of the business in a particular financial year.

Examples: –

1. Profit on Sale of Assets 
2. Commission Charged on other business to do their work
3. Discount Received at the time of making payment to vendors
4. Sale of Scrap

Differences between the Direct and Indirect Expense:

Direct and Indirect Expenses: Differences

You can also read the following topics: –

• Assets – Meaning, Definition, Types and Examples
• Liabilities – Meaning, Types and Examples
• What is Capital – Meaning and Example

Thanks Please share with your friends  

Comment if you have any question

Check out Financial Accounting Books @ Amazon.in