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Think of your life as though it was a large swimming pool that is actually sitting smack in the middle of a river, or creek. It is not all that wide of a river, so the banks of the river are actually touching the sides of the pool. At one end, there is a nice, fresh stream of water flowing into it (say, from a natural spring). At the other end, is a drain or outlet. The water flows into the pool from the inlet and is captured there for you to enjoy and utilize, then it flows out of the drain end and on down the river. For a while, you have 'pooled' the water resource of the river (instead of watching it flow by), and can enjoy it's depth. In this environment, the amount of water flowing into the pool (income) is controlled by the upstream end, and the amount of water flowing out of the pool (expenditure) is controlled by the drain or outlet. As water flows down this river, it is temporarily captured within the pool of your life. If the drain or outlet of the pool is greater (larger) than the upstream inlet, then the water depth within the pool will decrease until there is only a trickle of water within your pool. Many would be happy having any water flowing into their pools at all (especially in the world's economy these days), but being able to pool that resource will allow you to enjoy other facets of that resource, such as; drinking, cooking, bathing, diving, snorkeling, or even a simple "Marco Polo" game with friends and family. Unless you control (monitor) the drains (expenditure) to ensure that the amount of water exiting the pool is less than (or just equal to) the amount coming into the pool, you will not be able to enjoy these extra activities. Monitoring financial income and expenditures (expenses) is almostidentical. The work you perform and the income you create is almost identical to the water flowing down that river. Your life is the pool, and the 'cost of living' is the drain. When you survey the pool and identify where all the drains are located (housing costs, food, utilities, transportation, etc) and add up the amount of water that flows through them and on down the river, that number can be monitored (controlled) so that it is less than the amount of water that is coming into the pool. This is a simple income vs. expenses example, but your pool 'could' have more than one income (inlet) and more than one expense (drain), so it is even more important to monitor them. As an example, during the Spring season of the year, the water 'also' flows from another side of the valley and into your pool. Therefore, temporarily, you have an additional income into the pool of your life, but the drains are the same. Your pool level rises, which allows you to even enjoy the 'high dive' platform. But, as summer draws near, that secondary income begins to dry up for the year, and you are back to the single source of income (the primary river). Too often, people open more drains in their pool when this new income arrives (living the good life), but neglect to close them back down as it begins to dry up. Without properly monitoring your expenses, the amount of money you have pooled in your life will decrease (more going out, than coming in) and you'll find yourself wading around in a trickle creek, as it were, and unable to sustain the fuller life you once enjoyed. Not to mention, you will no longer have the deeper resources to help anyone else less fortunate than you... and that is actually the key to this whole pooling purpose. You can not take it with you, but there is no reason to just let it flow right on by. It is essential to let it flow (for freshness), but it should be controlled, and monitored, and some adjustments made to ensure you have the appropriate balance between income and expenditure. These are, after all, MyPerspectives.
What else can I help you with?
What is the difference between capital income and capital expenditure?
Income is money coming in, expenditure is money going out (spending).
Distinquish between savings and financial surplus?
This is the difference between Income and Expenditure in a non-profit making business, where the income exceeds expenditure
What is a principle of basic financial management?
The basic principle is this. Income exceeds expenditure = PROFIT Expenditure exceeds income = LOSS No profit or loss = BREAK-EVEN
Why aggregate income is equal to aggregate expenditure?
One man's income is another man's expenditure. The expenditure of buyers on products is, by the rule of accounting, income to the sellers of those products. Every transaction that affects income must affect expenditure. If, for example, a company produces and sells one extra loaf of bread. This transaction will raise total expenditure on bread, but it also has an equal effect on income. If the company produces the extra loaf without hiring any more labour (such as making the production process more efficient), then profit increases. If the company produces the loaf by hiring more labour, then wages increase. In both cases, expenditure and income increase equally.
Is it possible to have a negative net income and positive cash flow?
Yes and No. If the method of accounting followed is Mercantile, Yes. If the method of accounting followed is Cash System, No. In Mercantile method of Accounting, Negetive Income represents the excess of expenditure over income. In this method; Income and Expenditure considered are on accrual basis, i.e., income or expenditure is taken as such in the books of account; the moment a right to receive income or a liability to pay for expenditure has crytallised. The movement fo cash into the business or out of business is not the criteria. Therefore, inspite of a negative income in a particular year, a business may have a positive Cash flow on account of excess of cash flow arising out of previous years income, which is held as an asset in the form of Sundry Debtors, over the payments made in respect of previous years expenditure which is held as a liability in the form of Sundry Creditors on the balance sheet.
Is credit income or expenditure?
Credit is neither an income or an expenditure. It becomes an expenditure when you use it. expenditure
What do you mean by income over expenditure or expenditure over income?
income over expenditure is profitexpenditure over income is loss
What is the difference between income and expenditure incurred?
Inflow of money is income . Outflow of money is expenditure
What does the income-expenditure identity say about the relationship between income and expenditure?
The income-expenditure identity states that in an economy, total income equals total expenditure. This means that the amount of money earned by individuals and businesses is equal to the amount of money spent on goods and services.
What is between revenue and expenditure?
revenue is income and expenditure is an expense
What is income expenditure?
A statement that records the income and expenditure of an organization such as a charity,whose main purpose is not the generation of profit.
What is the difference between capital income and capital expenditure?
Income is money coming in, expenditure is money going out (spending).
Is it true for an economy as a whole. income equals expenditure because the income of the seller must be equal to the expenditure of the buyer?
Yes
Which financial statement summarises income and expenditure?
income statement
Is saving an injection into and investment a leakage from the income expenditure stream?
Savings are a leakage from the income expenditure stream because they drain on the economy
What is the expenditure of a company whose income for 1 year is Rs108000 and has a profit of 45 percent?
Income is Rs108000. If profit is 45%, then expenditure is 55% Hence expenditure is 55% of Rs108000, or Rs59400.
Distinquish between savings and financial surplus?
This is the difference between Income and Expenditure in a non-profit making business, where the income exceeds expenditure
