Personal income comes from what a person supplies: labour earns wages, land or property earns rent, lent savings earn interest, and a business earns profit. A payment received for supplying nothing is a transfer.
This lesson is part of money, banking and income. It feeds directly into interpreting a budget using supplied figures, where income is the first line.
How do I tell the sources apart?
Ask what the person supplied to receive the payment. The answer names the source.
| Source | What the person supplies | Payment |
|---|---|---|
| Wages or salary | Labour | A regular pay |
| Rent | Land or property | Payment from a tenant |
| Interest | Savings lent to others | Payment on the loan |
| Profit | Enterprise, by running a business | What is left after costs |
| Transfer | Nothing in return | Assistance or a gift |
Worked example: one month for an invented person
Faiz, an invented person, receives the following in a month.
| Receipt | Amount | Source |
|---|---|---|
| Salary from an employer | RM3 200 | Wages |
| Rent from a spare room | RM600 | Rent |
| Interest on a savings account | RM40 | Interest |
| Profit from a weekend stall | RM900 | Profit |
| Cash assistance | RM200 | Transfer |
The total is 3 200 + 600 + 40 + 900 + 200 = RM4 940. Income from factors leaves out the transfer: 4 940 − 200 = RM4 740.
Check the second figure by adding factor incomes alone: 3 200 + 600 + 40 + 900 = 4 740. Both routes give the same answer.
The mistake to avoid
The common slip is to label by the amount or the sound of the word, not by what was supplied. A student sees “RM600 from the spare room” and writes “wages” because it arrives monthly like a salary. Another writes “interest” for the stall’s RM900 because it is “extra money”.
| Receipt | Wrong label | Right label | Reason |
|---|---|---|---|
| Spare room payment | Wages | Rent | Property supplied |
| Weekend stall | Interest | Profit | Business run |
| Cash assistance | Wages | Transfer | Nothing supplied |
A labelling routine
- Write each receipt on its own line.
- Beside it, write what the person supplied, in one or two words.
- Match that to the source.
- Total by source, then in all.
The routine keeps the labelling separate from the adding, which stops the two from blurring. For a percentage split of the total, check your bases using the percentage base and index explorer. For example, Faiz’s salary is 3 200 ÷ 4 940 = 64.8% of total income, using the total as the base.
Check yourself
An invented person receives RM2 800 as a clerk’s pay, RM300 rent from a shop lot she owns, and RM120 as an annual gift from a relative. Label each and find total income and income from factors.
Answer
RM2 800 is wages, RM300 is rent, and RM120 is a transfer, because nothing was supplied in return.
Total income = 2 800 + 300 + 120 = RM3 220.
Income from factors = 2 800 + 300 = RM3 100.
Check: 3 220 − 120 = 3 100.
What to study next
Go to interpreting a budget using supplied figures. Before that, see how comparing roles of financial institutions explains where interest comes from.
If you want a teacher to give you mixed lists and check your labels, see online one-to-one Economics tuition.