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1 - Consistency concept
2 - Cost concept
3 - Matching concept
4 - None of the above
Accounting income, often referred to as business income or conventional income is measured in accordance with generally accepted accounting principles. The profit and loss account or income statement determines the net income or operating performance of a business enterprise for some particular period of time.
Income is determined by following income statement approach, i.e., by comparing sales revenue and costs related to the sales revenue.
Economic income may be defined as the operating earnings plus the change in asset values during a time period. Economic income is measured in real terms and results from changes in the value of assets rather than from the matching of revenue and expenses.
In traditional accounting, the concept of accounting income has been recognised widely. Adequate attention has not been given to the capital maintenance concept associated with income measurement. In fact, ‘income measurement’ and ‘capital maintenance’ are interrelated or twin concepts.
