Transactions such as the purchase of assets or the issuance of debt are not considered income because:
A) they involve external parties.
B) they necessarily involve cash.
C) they do not result in an increase in equity.
D) they both result in an increase of the asset or liability concerned.

Question

Quizplus · Accepted Answer

Income is defined as any increase in economic benefit during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in an increase in equity, other than those relating to contributions from equity participants. Transactions such as the purchase of assets or issuance of debt do not result in an increase in equity and therefore are not considered income. Choice A and B are incorrect because they are not relevant to whether a transaction is considered income or not. Choice D is also incorrect because an increase in asset or liability does not necessarily equate to an increase in equity or income.

Transactions Such as the Purchase of Assets or the Issuance