Financial Glossary
Accounting Income
Accounting income is the profit a business reports on its income statement, calculated as recognized revenue minus the expenses recorded under accounting standards such as GAAP. Because it follows accrual rules and bookkeeping conventions, it can differ from the cash a business actually collects and from the income reported on a tax return. It is sometimes called book income to distinguish it from taxable income.
Problem & Application
Owner-operated businesses are often surprised that their accounting income does not match either their bank balance or the figure their taxes are based on. Timing items like depreciation, accrued expenses, and deferred revenue create those gaps, and understanding them is essential before reading a profit and loss report or planning distributions. Clean, consistent bookkeeping is what makes accounting income reliable enough to base decisions on.
In Short
Accounting income reflects profitability under accounting rules, not cash on hand or taxable income, so it should be read alongside both.