Difference Between Direct And Indirect Income

 

A Direct Income or Revenue is related to the main source of revenue of the business as the business totally depends upon such main source to exist, to operate and to earn Profits or Income from profitable activities for the period. For example, if an automobile company sells cars which is its main purpose to sell and earn profits, then the main source of revenue for such auto company is Selling of Cars. Usually, the main source of revenue for any kind of business is a Sales i.e., goods sold or services rendered to customers against a payment. Direct income is recorded in Income Statement or Trading And Profit And Loss Account. It is a Temporary Account so it is closed to Income Statement at the end of the accounting period.

Indirect Income or Revenue has no concern with the main source of revenue of the business rather than it is earned through other sources. As we see in our above example for an auto company which sells cars to customers as a main source of revenue but there are other sources of revenues for such auto company such as Discount Received from its suppliers for Purchases, Commission Received by promoting other company’s products, gain on the sale of old cars, etc. Like direct income, indirect income is also recorded in Income Statement or Profit And Loss Account but these incomes or revenues are recorded after calculating Gross Profit or Gross Income for the period.