Key Concepts
Other income arises from activities that are not the primary business of the entity — for example, a trading business that earns rental income from a spare unit, or any business that earns commission from referring customers to a third party.
Other income is recorded and closed in the same way as sales/service fee revenue. Each type of other income has its own account:
| Account | Debit | Credit |
|---|---|---|
| Other income (e.g. Rental income) | [Specific Income Account] | Income summary |
Do not use "Other income" as a ledger account name — it is a heading in the Statement of Financial Performance only. Always use the specific account name (e.g., Rental income, Commission income).
"Other income" is a heading, not a ledger account. In the journal entry, always write the specific name — Rental income, Commission income — never "Other income."
| Date | Particulars | Dr ($) | Cr ($) |
|---|---|---|---|
| 20X5 | |||
| 30 Jun | Cash at bank | 800 | |
| Commission income | 800 |
By year end, twelve such entries have been posted, giving Commission income a total balance of $9,600.
| Date | Particulars | Dr ($) | Cr ($) |
|---|---|---|---|
| 20X5 | |||
| 31 Dec | Commission income | 9,600 | |
| Income summary | 9,600 |
Using "Other income" as a ledger account name — "Other income" is a presentation heading only. The journal entry must use the specific account name (e.g., Rental income, Commission income).
Placing other income in the trading portion of the Statement of Financial Performance — Other income appears after gross profit, not in the trading portion alongside sales revenue.
Closing an income account by crediting it. Closing means reducing the account to zero — since an income account normally carries a credit balance, it must be debited to bring it to zero. The closing entry always debits the income account and credits Income summary.