From the foregoing definition it is clear that the accounting income is the difference between the realized revenues arising form the transactions of the period and the corresponding historical costs (expenses) incurred to earn those revenues. The following characteristics of accounting income, based on such descriptions may be noted as:

(i)    Accounting income is based on the actual transactions entered into by the firm, primarily revenues arising from the sales of goods and/or services minus the cost necessary to achieve these sales. The transactions may be external and internal. External transactions results form the purchase of goods or services by a firm from other entities. They are based on objective evidence. On the other hand, internal transactions result from the use or allocation of assets within a firm e.g. depreciation. They are based on less objective evidence such as the use or passage of time.

(ii)    Accounting income is based on the accounting period convention in the sense that it refers to the financial performance of the business performance of the business enterprise for a given period.

(iii)    Accounting income is based on the revenue principle. Accounting income requires the definition of measurement and recognition of revenues.

(iv)    Accounting income requires the measurement of expenses in terms of historical cost to the enterprise.

(v)    Accounting income requires that the realized revenues of the period be related to appropriate or corresponding relevant costs. Accounting income is therefore based on matching principle.

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