What's what in finances: Income What's what in finances: Income

What's what in finances: Income

Income is the revenue a business earns from selling its goods and services or the money an individual receives in compensation for his or her labor, services, or investments. Businesses report this figure on the income statement whereas individuals report theirs on the form 1040.

Individuals receive income through earning wages by working and making investments into financial assets such as stocks, bonds, and real estate. For instance, an investor’s stock holding may pay income in the form of an annual 5% dividend.

In most countries, earned income is taxed by the government before it is received. The revenue generated by income taxes finances government actions and programs as determined by federal and state budgets. The Internal Revenue Service (IRS) calls income from sources other than a job, such as investment income, “unearned income.”

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