Income accounts collect revenue and expense balances for a reporting period so accountants can determine profit or loss before closing entries.
Income accounts are the temporary accounts used to measure performance over an accounting period. They include revenue accounts and expense accounts, and together they feed the profit and loss account.
They differ from balance sheet accounts because they are period-based rather than ongoing. After the reporting period closes, their balances are transferred through closing entries rather than carried forward as continuing asset, liability, or equity balances.
Revenue accounts record inflows earned from the business’s operations and other sources, including:
Expense accounts record the costs of earning that revenue, including:
| Feature | Income accounts | Balance sheet accounts |
|---|---|---|
| Purpose | Measure performance over a period | Show financial position at a point in time |
| Includes | Revenues and expenses | Assets, liabilities, equity |
| Closing treatment | Closed at period end | Usually carried forward |