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

Under the IASB Conceptual Framework, which of the following is the definition of income?

Income is an increase in economic benefits during the period, through asset inflows or liability decreases, that increases equity, excluding contributions from equity participants. It covers revenue and gains, so it is wider than sales and is not the same as cash received.

  1. AIncreases in economic benefits during the 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 participantsCorrect
  2. BIncreases in assets during the period that result from the sale of goods or services to customers only
  3. CCash received from customers and investors during the period
  4. DIncreases in equity arising from owners' contributions of capital

Explanation

Income covers increases in economic benefits that increase equity, other than contributions from equity participants. It includes revenue and gains, not just sales. Owners' capital introduced is not income, and cash receipts alone do not define income.

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