Surbhi S explains the key difference between wealth and income
While income is generated, wealth is created, there is a big difference between two. Many think that these two terms are one and the same thing, but in reality, income is a stream of money, which a person receives from different sources such as salary, rent, profit, interest etc., that helps in the creation of wealth and wealth is the total market value of all the assets possessed, stored or saved by a person for future use.
The former is the money earned by a person, over a limited period say one week or one month, whereas the latter is the money earned by a person during his lifetime. So, if you are also confused between these two terms, take a look at the article provided below to have a clear understanding of these two terms.
Definition of Income
We define income as the monetary return that accrues/arise or is expected to accrue/arise at fixed intervals from certain sources. It is an amount of money, which a person gets, receives or earns, either through investing capital or through providing goods or services. It is the fundamental requirement of an individual, household or business to finance routine expenses. The sources of income can be:
- Wages and salary from employment.
- Rental income from house property.
- Interest on savings and securities.
- Dividend income.
- Income from business or profession.
In accounting terminology, income is net of revenue, i.e. revenue less all expenses and taxes. Moreover, while the calculation of taxes, income covers only revenue receipts and includes those incomes also which do not arise on a regular basis, such as winning from lotteries, horse races or crossword puzzles.
Definition of Wealth
Wealth denotes the current market value of total assets owned by an individual, society, company and country. It is the sum of all tangible and intangible assets, an entity possesses, that can be exchanged for money including savings, investments, real estate, cash and other valuable items less all liabilities.