Measurement of Business Income

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What is the measurement of a business income?

National income
Gross income
Business Income (correct)
Net income

Which income figure is used as the base for future projections?

Personal income
National income
Gross income
Net income (correct)

According to the American Accounting Association, what measures the effectiveness of an enterprise as an operative unit?

National income from asset conversion
Realized net income (correct)
Gross income compared with expired cost
Net assets arising out of sales

What is the surplus revenue over expenses incurred called as?

Business Income (A) Signup and view all the answers

Why is ascertainment of a net income necessary for a firm?

All of the above (D) Signup and view all the answers

Explain the concept of business income and its significance in accounting.

The concept of business income refers to the surplus revenue over expenses incurred by a business. It is significant in accounting as it helps in evaluating the financial performance and effectiveness of a business as an operative unit. Signup and view all the answers

What are the objectives of determining net income in a business?

The objectives of determining net income in a business include providing a base for future projections, distributing profits to employees, evaluating activities with higher returns, increasing the wealth of the firm, and paying dividends to shareholders. Signup and view all the answers

Define income according to the American Accounting Association.

According to the American Accounting Association, income is the realized net income of an enterprise, measuring its effectiveness as an operative unit and representing the change in its net assets arising from revenue, expenses, gains, and losses. Signup and view all the answers

How does ascertainment of net income contribute to evaluating the efficiency of a business?

Ascertainment of net income helps in evaluating the efficiency of a business by providing a return on income on capital employed, giving an idea of the overall efficiency of the business. Signup and view all the answers

Why is the measurement of business income an important function of an accountant?

The measurement of business income is important for accountants as it helps in assessing the financial performance, wealth creation, and operational efficiency of a business, and it also serves as the base for future projections and profit distribution. Signup and view all the answers

Explain the concept of surplus revenue over expenses incurred in a business income context.

Surplus revenue over expenses incurred is called as 'Business Income'. Signup and view all the answers

Why is the ascertainment of net income necessary for paying dividends to the shareholders of any company?

Ascertainment of net income is necessary for paying dividends as it determines the portion of profit available for distribution to shareholders. Signup and view all the answers

According to the American Accounting Association, what is the most authentic definition of income?

The most authentic definition of income is given by the American Accounting Association as 'The realized net income of an enterprise measures its effectiveness as an operative unit and is the change in its net assets arising out of (a) the excess or deficiency of revenue compared with related expired cost, and (b) other gains or losses to the enterprise from sales, exchange or other conversion of assets'. Signup and view all the answers

Why is historical income figure the base for future projections?

Historical income figure is the base for future projections as it helps in forecasting and planning for future financial activities based on past performance. Signup and view all the answers

How does ascertainment of net income contribute to evaluating the activities which give higher return on scarce resources?

Ascertainment of net income helps in evaluating the activities which give higher return on scarce resources by analyzing the efficiency and profitability of different operations within the business. Signup and view all the answers

Measurement of Business Income

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