Money income refers to the command over goods and services available in the economy. Real income is National Income or National Income at Constant Prices (NICOP). It is the rate of growth of NICOP that signifies rate of economic growth. Real income, also known as real wage, is how much money an individual or entity makes after adjusting for inflation. Real income differs from nominal income, which has no such adjustments. Types of Income: Income refers to money typically received on a regular basis, from work or investments. There are several different types of income, such as real income and money income. Income is defined as the consumption and savings opportunity that is gained following deducting all necessary expenses. The money that is saved after all the expenses have been deducted is considered as an income. Money and income are two different words that refer to two different things. The difference between the real income and nominal income is that real income takes into account the effect of inflation whereas nominal income does not take into account the effect of inflation. Real income is calculated after subtracting inflation from the nominal income. Real income=nominal income-inflation.

What Is Real Income And Money Income
What Is The Difference Between Real Income And Money Income Accounting
What Is The Difference Between Real Income And Money Income Tax

Family income is classified into three types:

(1) Money Income

(2) Real Income

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(3) Psychic Income

1.Money Income:

Money Income is the purchasing power in rupees during a given period of time. Money income is one of the important material resources of the family. It is said, “Money is a matter of function four, a medium, a measure, a standard and store”. Some people say that “We cannot cat money, but we cannot eat without money.” According to D.H. Robertson, “Money is anything which is widely accepted in payment for goods or in discharge of other kinds of business obligations.” Money income of the family includes all the earnings which come to the family in terms of rupees, coins or notes in a specific period of time, daily, weekly, or monthly.

What Is The Difference Between Real Income And Money Income

Money income may be in the following forms:

(a) Salary:

Monthly salary of all the members who are doing government or private services.

(b) Wages:

Daily, weekly or monthly wages.

(c) Rent:

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Rent of the house and real estate.

(d) Interest:

Interest of the capital deposited in banks, post offices or from lending money.

(e) Profits:

Profits from investment either in business or any other sources.

(f) Sick Benefits:

Medical Allowances.

(g) Pensions:

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To the retired persons, old age widow and other pensions

(h) Gift, dividends, securities, royalties etc.

Money income controls the basic standard of living and the additional comforts enjoyed by the family.

Money income is affected by the following factors:

(i) The abilities and skill of the wage earner.

(ii) Personal attitude towards the work.

(iii) Good relationship with co-workers.

Money income may be converted into goods and services, whenever required by the family. Some parts of money income may be diverted into savings for future use. Money management includes the management of family income. As money is a limited resource it must be managed properly in order to achieve family goals. Money income is called a flow as it is received regularly.

2. Real Income:

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Real income is the flow of goods, services and community facilities available for a specific period of time. According to Donaldson, “The real value of income received is the goods and services and security and well being, that income (money) will purchase.” The concept of real income is very much important for family living. Real time consists of both producers and consumer’s goods.

The real income of the family consists of:

a. Inherited landed property, which yields crops for the family.

b. Food furnished by a kitchen garden.

c. Dairy farming and poultry farming.

d. Durable goods and commodities owned by the family.

e. Kneading, embroidery, tailoring, pickling, baking and activities carried out in home.

f. All types of knowledge and services (Household activities) provided by the members of the family.

g. Community facilities like parks, markets, hospitals, roads, schools, colleges, libraries, dispensaries, fire and police protection, community entertainments, social centres etc. Proper utilization of all these can increase the real income of the family.

Another concept of real income is that it is the goods and services that money income will provide. The potential quantity of Real income available for any family is impressive. The way families make use of all forms of real income is important. It depends upon the managerial ability of the home maker.

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The real income may be of two types:

(i) Direct Income:

It means a family receives different facilities without paying for them. For example, free well furnished house, telephone at residence, vehicle for private use, hospital facilities etc.

(ii) Indirect Income:

It refers to the commodities and services received by the family members on payment. For example, vegetables from the kitchen garden, milk from the diary farm etc. These things can be used by the family or may be sold in the market.

3. Psychic Income:

This income is the flow of satisfaction derived by the family from the use of money income and real income. This income is intangible and qualitative or subjective. This income is also called as Enjoyment income, experienced over a given period of time by the proper utilization of money income and real income. We must maximize psychic income, because our ultimate goal is to derive maximum satisfaction and peace from life.

As Real income is directly utilized, it is called as direct income. Money income cannot be directly utilized, but it is used as a medium of exchange for obtaining goods and services. So it is called as Indirect income of the family. Money income is mainly based on the earning capacity of the members, but the real and psychic income depends on the skill that is exercised in management of everyday living.

Total Income:

Total income consists of money income received over a certain period of time and the real income received during the same period from other sources without spending one’s own money income. The family utilizes this total income to obtain goods and services for the satisfaction of its needs and saves some unused money income for future use, gifts to other persons or payment of taxes.

Wage vs Income

What Is Real Income And Money Income

The two words ‘wage’ and ‘income’ might look similar with no difference at all whatsoever, but strictly speaking there is difference between the two words.

The word ‘wage’ is often used in the plural as ‘wages’ whereas the word ‘income’ is a collective noun and the form ‘incomes’ is used sparingly. It is used as an uncountable noun for that matter.

What Is The Difference Between Real Income And Money Income Accounting

Wages is usually paid to you by the hour or in short it can be said wages is a kind of income that is earned by the hour for an agreed number of hours per week. You may for example earn wages of $10 per hour in a factory as its employee.

It is interesting to note that the wages that you earn by the hour are usually paid to you once a week or more recently in a few countries once a month. It is quite remarkable to know that in

1.Money Income:

2. Real Income:

3. Psychic Income:

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What Is Real Income And Money Income

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