What Are The Key Difference Between Income And Revenue?
Key difference between income and revenue?
INCOME: As per Conceptual Framework , income is ” 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”.
Revenue: Revenue arises in the course of the ordinary activities of an entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent.
Put simply, an increase in an asset or a decrease in a liability will result in income, unless the increase or decrease results from an equity contribution (such as cash raised through share capital).
The IASB Conceptual Framework states that income encompasses both revenue and gains. The only distinguishing feature of revenue is the reference to ‘ordinary activities of an entity’. The distinction is essentially a classification issue within income, to distinguish revenue from an entity’s ordinary activities from its other activities. Because of this broad definition, income is further dissected into revenue and gains.
Gains, on the other hand, are described in the Conceptual Framework as other items that meet the definitions of income and may or may not arise in the course of the ordinary activities of an entity. Gains include, for example, the gain on disposal of non-current assets, and from upward revaluation of financial assets that are classified as ‘available for sale’. Key difference between income and revenue should be clear before recognition.