Which statement describes income under the Framework?

Which statement describes income under the Framework?

• A. Increases in assets or decreases in equity, other than contributions from equity holders.
• B. Increases in liabilities.
• C. Distributions to owners.
• D. Cash receipts from customers.

Answer: (A)

Income means an increase in economic benefits during the period that results in higher equity, other than contributions from owners. These benefits show up as increases in assets or decreases in liabilities, because both raise the entity’s net resources and hence equity. The described statement captures this idea by linking income to increases in assets or reductions in liabilities that boost the entity’s equity, while excluding owner contributions. It’s not merely cash receipts from customers, since income can be non‑cash or involve changes that reduce liabilities, and not every cash receipt qualifies as income.

Income means an increase in economic benefits during the period that results in higher equity, other than contributions from owners. These benefits show up as increases in assets or decreases in liabilities, because both raise the entity’s net resources and hence equity. The described statement captures this idea by linking income to increases in assets or reductions in liabilities that boost the entity’s equity, while excluding owner contributions. It’s not merely cash receipts from customers, since income can be non‑cash or involve changes that reduce liabilities, and not every cash receipt qualifies as income.