ABSTRACT
The significant of income to any business entity cannot be overemphasized. Income of the residue That is available for distribution to the shareholder which ensured the maintenance of the capital (Glautieu et al 2011:430). Income is a basic and important item of financial statement that has various uses in various context. It is generally perceived as a basis for taxation and redistribution of wealth, a determination of dividend payments policies and investment and decision making guide and element of prediction (Riachi-Belkauie 2002). The choice of income measurement concepts which has a direct bearing on the operating performance reporting of an organization is informed by some factors which this paper sought out to examined.
To achieve the objective of this study, opinion of selected staff of ABC transport Nigeria Ltd was sought thought the use of questionnaire and besides relevant theories and concepts were reviewed. The questionnaire were analyzed. The evidence show that the choice of accounting concepts as the prevailing income measurement concept is premised on historical cost accounting given its unconditional and long standing acceptance of this version of income by the accounting profession and the business world. This can be explained by the fact that its objectives verifiable practical and easy to understand and avoid of confusion.
Chapter One
Introduction
1.1 Background of the Study
Business are in the business of earning income. Their activities do not necessarily coincide with standard periods of time, but the business environment requires that firms report income or loss regularly. For example, owners must receive income reports every year, and the government requires corporations to pay taxes on annual income. Within the business, management uses financial statements – prepared every month or more often to monitor performance. Because of these demands, a primary objective of accounting is measuring net income in accordance with generally accepted accounting principles.
Readers of financial reports who are familiar with these principles understand how the accountants defined net income and are aware of it’s strengths and weaknesses as a measurement of company performance.Business rely on profit to buy new inventory, expand operations and finance product development. Without profit, business would stagnate and risk losing its market share to other competitors. Its share price will fall, which means its cannot rise as much money with share sales and cannot borrow from banks as easily. The goal of many businesses is to generate a profit for owners, employees and shareholders. It is therefore imperative at this point to illustrate the definition of income measurement. From accountant’s perspective, income is defined as the residual portion of revenue which is the result of subtracting total revenues generated from the total expenses incurred by the company during the revenue generation phase.