When you run a business or work as a freelancer or sole trader, income is the term for what you earn from selling your products and services.
Usually selling products and services constitutes your main income, but your business can also earn money from stocks or interest on bank deposits.
If you have a holding company, earnings will come from the shares and interest the holding company has in other companies.
You have to pay tax on your earnings. This is called corporate tax if you run a business, and business income tax if you’re a freelancer, contractor or self-employed as a sole trader.
See also: How to earn more as a freelancer
When it comes to bookkeeping
When you do your accounting, income should be recorded on the day you create the invoice for your product or service. Let’s take an example:
You sell a product for $500. You deliver the product and generate the invoice on January 30.
The income date in your accounting will be January 30. When the client pays you on February 14, you register it as paid with this payment date.
See also: 7 tips to get paid fast
To work out how much you’ve earned, you have to deduct expenses from your total revenue. Expenses can be variable costs such as materials and wage costs, and fixed costs such as rental costs, insurance, and interest on loans.
If you run a limited liability company, you have to include this information on your business’ income statement.
Income for individuals
Individuals earn money from working for an employer, and from stocks and shares that they have. However, there is a difference between gross and net: Gross income is the total salary before any deductions, while net income is how much money is actually paid into the employee’s bank account on payday.