Earning And Income: Mean Same, Yet Different
Generally, the words earning and income are both used as a synonymous of one another, but one thing to know is that there are different types of income as well are earnings whose meaning is also different.
Earnings with respect to a business we can define as, the profit that the business has earned for a particular amount of time. The income statement of the company enlists earnings sum in the form of net income. You can earn income through trading, see the source. Whenever there is a reference to a company’s earnings by investors, it means that they are mentioning about the net income of the company or the profit earned in that period. In a similar manner, an income of the company is also considered as the net income of the company or profit made.
Understanding Net Income
Net income of the business is calculated by subtracting all the expenditures done by the company from total revenue and after this whatever amount remains will become the profits earned by the company. Generally, the expenses that a company might have are as follows:
- Paying rate of interest for a loan taken.
- Selling expenses, administrative expenses and general expenses which are overhead expenses.
- Paying income taxes.
- Work expenses like, rents, salaries and utility expenses.
The income that is not the straight result of selling of goods and services are also included in the earnings and net income. Such income may consist of proceeds got from selling assets or division and gains got from the rate of interest on the investments made.
The company’s concluding line in its income statement there is always reference of both net income as well as earning since it is the profits that are made by the company after paying all the costs involved in the business.
On the other hand, revenue is on top of the company’s income statement and it should not be jumbled with net income and earnings because revenue is the total amount before the deduction of expenses that is earned by the company in a period of time.
Types of earnings are income
- Retained earnings: It is a progressive total profit or net income that is kept aside by the company in order to be utilized in the future.
- Earnings per share: It is a portion of a profit made by a company that is allotted to every stock that is outstanding of a common stock.
- Investment income: It is a source through which a company earns money as well as an individual who has done investment can earn income.