Income in accounting is best described as what?

• A. An increase in proprietorship as a result of a business transaction.
• B. Net profit
• C. Cash inflow only
• D. A decrease in equity

Answer: (A)

Income is the increase in the owner's equity that comes from the business activities. In a sole proprietorship, earnings add to the proprietor’s capital, so revenue and other income boost the proprietorship balance. This description fits best because it connects earning activity to an actual rise in the owner's stake in the business.

Cash inflows are not the full story, since income can be earned on credit and still increase equity even if cash hasn’t yet come in. An increase in equity is the key idea, not a decrease. And while net profit reflects earnings after expenses, income is the broader concept that describes the result of business transactions that raise the proprietor’s equity.