Income Account
An income account records money earned, such as sales, service revenue, or interest, and it carries a normal credit balance that grows as revenue comes in.
In short
Sales, Service Revenue, Other Income — all credit-normal, all growing as money is earned. A loan or an owner's contribution is never recorded here, even though both can look like income arriving in the bank; neither is money actually earned.
Also called: revenue account
An income account records money genuinely earned — a sale, a completed job, interest credited by a bank. It's one of the five account types, credit-normal like liability and equity, so it grows with a credit and shrinks with a debit. Every income account appears on the profit and loss statement, which totals them alongside expenses to arrive at net income.
Not everything that arrives in a bank account is income, and getting this distinction right matters for an accurate P&L. A business loan increases cash immediately but is never income — it's a liability, since it has to be repaid. An owner's personal contribution likewise increases cash without being income — it's equity, money the owner is putting in, not money the business earned.
BalanceMCP's starter charts include Uncategorized Income specifically for money that arrived but hasn't been sorted into a real income account yet. It behaves exactly like Sales or Service Revenue on reports while it sits there, which is precisely why it's meant to be temporary — a shrinking balance means categorization is keeping up; a growing one means it's falling behind.
Deciding which specific income account a deposit belongs to is a genuine categorization judgment, the same as any expense decision — a sale is Sales or Service Revenue depending on the business, while a one-off gain, a rebate, or interest earned typically belongs in Other Income instead, since it isn't the business's core, repeatable source of revenue.
What people get wrong
- Recording a loan or an owner's contribution as income — neither is money earned, even though both can increase cash the same way a sale does.
- Letting Uncategorized Income sit unresolved instead of reclassifying it to a real income account once its source is known.
- Recording a one-off gain or rebate in a core revenue account instead of Other Income, which distorts what the business's real, repeatable revenue looks like.
Common questions
- Is a business loan recorded as income?
- No, never — it increases cash and a liability by the same amount. It's debt, not earnings, even though it arrives in the bank the same way a sale would.
- What's the difference between Sales and Other Income?
- Sales (or Service Revenue) is the business's core, repeatable source of revenue. Other Income is for smaller, incidental amounts — interest earned, a rebate, a one-off gain — that aren't the main way the business earns money.
Machine-readable: /api/knowledge/concept:income-account