BASIC CONCEPT OF INCOME: MEASUREMENT AND RECOGNITION

The main purpose of this concept is to identify the various attributes of income from a taxing standpoint. The term income is already known by the public, even by those who do not earn even though. Two main issues concerning the determination of the amount of income, namely:

1. the definition or definition of income itself
2. methods of measurement
Economic Concepts

Economists define income as the amount (goods and services) which in a given period can be consumed by an entity, without causing a loss of capital, For more info you can see QuickBooks Support Number. Economists use the capital maintenance approach (equity or capital maintenance approach) in determining the income of an entity within a period.

Income = (Final Capital) – (Initial Capital), or
Income = (Consumption Value of Goods / Services) +/- (Changes in Capital)

With the equity approach, the amount of income in a period is determined by comparing the total market value of the capital or net assets at the end and beginning of the related period (other than those arising from deposits and capital withdrawals). Earnings are measured based on an increase (or decrease) in the value of wealth or capital held by an entity plus the value (market price) of the goods or services consumed in a period .

Accordingly, the economic concept of income is equal to the sum of the value (market price) of goods or services actually consumed by an entity plus an increase and / or reduced impairment of the value of goods or services which may or may be incurred in the future or in periods Next period, For more info you can see QuickBooks Payroll Support Phone Number .

The economic concept of income emphasizes the value of goods and / or services that can be consumed or the consumption capability of an entity. Income is measured by the ability of an entity to consume goods and services, often referred to as purchasing power or real income. Three fundamental aspects of the economic concept of income are:
1. The economic concept of income is a very broad concept.
2. The economic concept of income includes both realized and unrealized gains and losses.
3. The economic concept of income requires consideration of the effect or effect of changes in the price level, decreased purchasing power or inflation.
In measuring value changes, economists use an approach or perspective that is called current perspective, and therefore emphasizes the present value. Meanwhile, historical value or price is considered to be less relevant. The main problem of using current values ​​as the basis for measurement is that the present value is subjective, especially if there is no or no market available from the goods or services necessary to confirm the prices.

The change (increase or decrease in value) of a good or service measured not based on actual transactions is called unrealized gains or unrealized losses, and therefore objectively questionable objectivity, You must to see QuickBooks Cloud Hosting .

The emphasis on purchasing power, demanding should also be considered the effect of inflation (decreased purchasing power of money) as one of the factors of adjustment in the measurement of income. The increase in the value of goods and services solely caused by changes in the purchasing power of money (in this case decline) can not be viewed as income, because the increase in value is not followed by the increased ability to consume goods or services.