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ACCA Applied Knowledge · Financial Accounting · The main elements of financial statements

Under the IASB Conceptual Framework, which of the following best defines income?

Income is an increase in assets or a decrease in liabilities that increases equity, excluding contributions from holders of equity claims. It is not limited to ordinary activities or to cash receipts, and owner capital introduced is not income.

  1. AIncreases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claimsCorrect
  2. BCash received from customers during the reporting period
  3. CIncreases in economic benefits that arise only from the ordinary activities of the entity
  4. DIncreases in equity arising from contributions made by the owners of the entity

Explanation

The Framework defines income as increases in assets or decreases in liabilities that result in increases in equity, excluding contributions from equity holders. Option C is too narrow because income includes gains from non-ordinary activities. Option D is wrong because owners' contributions are expressly excluded.

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