Subscribe To This Site

Income Example

Previous lesson: Drawings Example
Next lesson: Accrued Income - Part 1

e) Now George’s Catering provides catering services for a wedding. George gets $10,500 from this job in cash. What happens to our accounting equation?

Bank has increased. As we have seen before, this means that we debit bank.

The business has made income, and this is worth $10,500.

Remember, more income means more profit, which means more for the owner. Income thus comes into being (and increases) on the same side as the owner’s equity – namely the right side.

The accounting entry is:

In accounting we list the exact type of income that took place (in this case it's services rendered).

Remember that income is not the assets (i.e. cash) you get from, for example, rendering services. It is the event itself (the rendering of the service) that results in cash coming in (immediately or at a later stage).

The cash is the asset part of the transaction. Income is the event that takes place that results in more assets being owned by the owner.

If you are having any difficulty understanding this example of income, return to our earlier lesson called Define Income where we go over in detail what income is and how it fits in with the accounting equation.

Or if you're struggling to apply debits and credits, return to our popular lesson, Debits and Credits: what they really mean, to solidify your understanding of these key accounting terms.

If however you feel good about debits and credits at this point, then move ahead...

Previous lesson: Drawings Example
Next lesson: Accrued Income - Part 1

Ask Us a Question About This Lesson

Still scratching your head after going through this lesson? No problem. Send us a question you have relating to this lesson or topic...

Before you submit though, it's a good idea to search the site to make sure your question hasn't been asked (and answered) before... just use the search feature at the top-right of your screen to search the site for any accounting topic. If after searching the site your accounting question has still not been answered, then submit it here.

Enter the title of your question:

Enter the question you want to ask: [ ? ]

Upload 1-4 Pictures or Graphics (optional) [ ? ]

Add a Picture/Graphic Caption (optional)

Click here to upload more images (optional)

Author Information (optional)

To receive credit as the author, enter your information below.

Your Name	(first or full name)
Your Location	(ex. City, State, Country)

Submit Your Contribution

Check box to agree to these submission guidelines.

(You can preview and edit on the next page)

Read Other Questions Relating to This Lesson
(along with their answers)

Click below to see questions and solutions on this same topic from other visitors to this page...

Payments on Account with No Invoices Q: I have payments on account that I have no invoice's for. How do i deal with this?

A: Anne, you must have invoices for all product sales or services ...