BUSINESS INCOME IN ACCOUNTING AND ECONOMICS.
In economics, business income is defined as the maximum amount that the firm can distribute as dividends and still be as well off at the end of the period as at the beginning. To be as well off economically, a firm must maintain intact the present value of the expected future net receipts of the capital. In measuring business income as the residual from matching revenue against costs consumed, the accountant must value all assets on the basis of unabsorbed original money costs. The differences between the accountant's income statement and the economist's income statement are that the former includes only realized income while the latter includes both realized and unrealized income, and the former does not include gains and losses due to price level changes while the latter does. In a world where everything changes from time to time and nothing stands still, the three basic issues of accretion versus realization as the criterion for income recognition, inclusion versus exclusion of unexpected gain, and real income versus money income, will continue. Hence, accounting income and economic income will never be in agreement.
- DOI
- 10.2308/tar-7100204
- Volume
- 37 (4)
- Pages
- 636-644
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref