Difference between Personal Income and Disposal Personal Income

Here, discussed on Difference between personal income and disposable income from economics class 12

What is Income?

Income is the money received by a person or a company in exchange for labour, the production of a good or service, or the contribution of capital. It's the monetary value of a company's consumption and saving options for a given time span. Wages and benefits are common sources of income for people. Organizations make money by selling products or services to cover their production costs. Income is the flow of cash that comes into a family from employers, possessing a business, state benefits, rents on properties, etc. For households and people, “income is the amount of the multitude of wages, compensations, benefits, premium installments, rents, and different types of profit got in a given timeframe.”

In the field of public financial matters, the idea may involve the accumulation of both monetary and non-monetary consumption-ability, with the previous (money-related) being utilized as an intermediary for total income. For a firm, gross income can be characterized as the amount of all income less the expense of goods sold.

Following are common sources of incomes recognized in the financial statements:

i. Sale revenue generated from the sale of a commodity.

ii. Interest received on a bank deposit.

iii. Dividend earned on entity’s investments.

iv. Rentals received on property leased by the entity.

v. Gain on revaluation of company assets.

What is Personal Income?

The word “personal income” is often used to refer to an individual’s overall earnings, but “individual income” is a better term to use. Personal income, also known as “gross income,” is taxed in most jurisdictions above a certain threshold.

All income earned collectively from all individuals or households in a country are referred to as personal income. Salary, wages, and incentives from work or self-employment, dividends, and distributions from savings, rental receipts from real estate investments, and profit-sharing from firms are all examples of personal profits.

Difference between Personal Income and Disposal Personal income

1. Personal income refers to total earnings generated by an individual from investments, salaries, dividends, bonuses, pensions, social benefits, and other ventures over a given period.

Personal disposable income refers to the amount of revenue or funds a person has after taxes have been paid.

2. Personal income is subject to taxes and disposable personal income is not subjected to taxes.

3. Personal Income = Salaries/wages received + Interest received + Rent received + Dividends received + Any transfer payments

Personal disposal income = Personal income – Personal income taxes

4. As a financial marker, the Personal Income and Outlays report assist with checking the strength of the U.S. consumer sector. The report likewise assists investors with choosing which organizations to put resources into on the grounds that they can examine and follow whether buyers are spending on durables, non-durables, or administrations. Read this entire topic Difference between Personal Income and Disposal Personal Income here.

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