Income is really quite magical. You make some sort of contribution, and you’re paid.
You may produce a product or a service and sell it.
You may work for someone else, trading your time and effort for money.
You may receive capital gains from your assets when their market value has increased and you profit by reselling them.
You may receive income from your assets by lending, renting or leasing them.
Generally stated, your INCOME is the net total of all economic benefits you receive. Income is usually thought of in terms of cash inflows, but it’s important to understand not all your cash inflows are income. When you go to the store and give the clerk a $5 bill to buy a $1 candy bar, you receive $4 back – but that $4 is not income. Similarly – and as obvious as it may sound – funds you receive when you take out a loan (borrowings) are not income either. Remember that.
So, income relates to benefits you receive. Examples include salary, interest received, dividends received, rent received, and proceeds from sale of assets.
Income – you will know it when you see it. Without income, there is no profit.
It is easy to identify what has brought you income in the past. The hardest question is, “What could bring me income in the future?”