What are income and expenses in financial accounting and how are they classified?

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You need to know what are the income and expenses in accounting to do more effective work in your company or business. Well, in this article we will talk about what are expenses and income in accounting as other elements that make it up.

What are income and expenses in financial accounting and how are they classified?

What is income in financial accounting?

In accounting, the financial income are some results of profitability arising from the procedures in the financial activities of a company or institution. This represents or reflects an amount in favor of a specific activity performed on a budgeted capital investment. Undoubtedly, this flow and the amount of this income are largely supported by effective financial management of a company or company.

Financial sources

Financial collection derives from the use of cash and group of assets with some degree of liquidity, here are some sources of income.

  • Ownership or purchase of foreign currency.
  • Refunds on purchases for quick payments.
  • Bond Holding.
  • Interest on loans granted by the company.
  • Financing in shares.
  • Fixed income holder.

In summary, these proceeds are those that go into a company due to its commercial and financial operations.

Financial income accounts

Financial income is recorded individually in different accounts, below we show you what those accounts are in the company.

  • Raising for equity participation.
  • Positive spreads in foreign currencies.
  • Earnings from securities.
  • Credit income.
  • Other income earned by the company.
  • Income from rental values.

We want to emphasize that financial accounting takes into account that income must be recorded when it is received and not when it is collected.

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What are the expenses in financial accounting?

Financial charges are what arise from the provision of financing of any financial debt in a company. A very common financial expense is the interest paid on the debts, this allows the lender to acquire an interest or a benefit, which is mainly reflected in a percentage. In accounting, expenses are a key part of the accounting report, so expenses are minimized by the company's current result.

Types of financial expenses

In this aspect, there are usually a lot of financial expenses, here we will use a categorization that has been determined by the General accounting plan of Spain.

  • Deficits in divisions and characteristic debt values.
  • Non-commercial loan deficit.
  • Losses due to negative exchange rate inequalities.
  • General expenses for material enhancement.
  • Deficit in spending on financial activities .
  • Interest for factoring discount.
  • Dividend loss of shares studied as a commercial liability.
  • Interest on debts.
  • Interest on bonds and bonds.

Income statement - Financial expenses

In all financial charges there is an income statement scheme, below we will show you what this structure is, so let's come to it.

  • Net income or sales: includes the direct cost of goods exchanged or sold.
  • Gross margin: there are general expenses such as personnel and administrative expenses.
  • EBITDA financial indicator: in this section we have the depreciation and material expenses.
  • Earnings before interest and taxes: this is positive overtime income and special expenses.
  • Ordinary result: here we can find financial income and financial charges.
  • Profit before taxes: taxes on society.
  • Net income or result of the year.
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On the other hand, the companies that carry out this tabulation they can add other factors intermediate, for example if there have been interruptions along with the benefit of the tax rebate. This type of business means "continuing operations" which, added to the discontinued operations, reflect a net profit.

We concluded, we hope this article will be of great help to you and we suggest that you do not stop looking for the links we have left you.

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