Explain Direct Income vs Indirect Income with Examples

By BYJU'S Exam Prep

Updated on: November 9th, 2023

Direct income is the money that is received from doing tasks directly related to your business to make money. In contrast, indirect income is revenue derived from sources other than your business. Similar to direct expenses, indirect expenses can vary depending on the type of organization. Typically, different departments and business areas of the company share these expenses.

Direct Income vs Indirect Income

Expenditure is the amount paid to obtain products or services. They may have direct or indirect links to core business processes. The main difference between direct and indirect expenses is decided by the type of expense and the time at which the firm generates it.

Direct Income

An example of direct income is the active income of a business earned by selling the goods or services they offer. The term “direct” refers to expenses that are directly linked to and attributable to a company’s main lines of business. They are mostly concerned with the acquisition and manufacture of goods and services. A company’s principal costs include direct expenses or the price of its goods or services.

Direct costs, which can vary depending on the type of business, such as manufacturing, or service provider, are directly associated with manufacturing the goods or services sold.

Indirect Income

As the name suggests, indirect income is gained from non-business activities that produce revenue. Unlike direct expenses, indirect expenses are not immediately linked to and assigned to a company’s main lines of business. Although they are required to keep the firm running, indirect costs cannot be directly correlated with the price of the primary goods or services that generate income.

Examples of indirect income include methods such as fixed asset selling, selling old newspapers and bottles, etc.

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