BUSINESS MATH 4TH worked.
Someone receiving a
QUARTER REVIEWER
LESSON 4: BASIC BUSINESS
MATH
4.1 SALARIES, WAGES, and
INCOME
A salary is a form of payment from
an employer to an employee,
which may be specified in an
employment contract. It is
contrasted with piece wages,
where each job, hour, or other unit
is paid separately, rather than on a
periodic basis
What is the Difference between
salaries and wages?
A salaried person is paid a fixed
amount per pay period and a wage
earner is paid by the hour.
Someone who is paid a salary is
paid a fixed amount in each pay
period, with the total of these fixed
payments over a full year
summing to the amount of the
salary. This person is considered
to be an exempt employee. There
is no linkage between the amount
paid and the number of hours
salary is usually in a management
or professional position.
Someone who is paid wages
receives a pay rate per hour,
multiplied by the number of hours
worked. This person is considered
to be a non-exempt employee.
There is also a difference between
salary and wages in regard to the
speed of payment. If a person is
paid a salary, he is paid through
and including the pay date,
because it is very simple for the
payroll staff to calculate his salary,
which is a fixed rate of pay.
However, if a person is paid
wages, he is usually paid through a
date that is several days prior to
the pay date; this is because his
hours may vary, and the payroll
staff needs several days to
calculate his pay.
If a person is paid wages and there
is a gap between the last day
worked for which he is paid and
his pay date, that gap is paid in his
next paycheck. This gap does not
exist for a salaried worker, since
he is paid through the pay date.
Thus, pay is much more likely to
be accrued in a company's
financial statements for a person
being paid wages than for
someone being paid a salary.
Income is the consumption and
saving opportunity gained by an
entity within a specified
timeframe, which is generally
expressed in monetary terms.
There are five heads of income—
salary, income from
house/property, profit from
business or profession, capital
gains and income from other
sources
7 Sources of Income
1. Earned Income
Earned Income is the money that
you earn by doing something or by
spending your time e.g. the money
that you make in your job, the
salary you get by working for
someone else. Now, this is where
your quality of life will suffer the
most, because you will be trading
your time for money.
2. Profit Income
Money that you earn by selling
something for more than it costs
you to make. e.g. Businesses
selling their goods at a profit,
whether at the retail or wholesale
level, as distributors or
manufacturers. You need to be an
entrepreneur for earning profits.
2. Profit Income
Money that you earn by selling
something for more than it costs
you to make. e.g. Businesses
selling their goods at a profit,
whether at the retail or wholesale
level, as distributors or
manufacturers. You need to be an
entrepreneur for earning profits.
4. Dividend Income
This income gets even better than
Interest Income. It is equally
passive and not only that, it also
makes you a shareholder of a
company. This is the money that
you get as a return on shares of a
company you own. For e.g. the
dividend that most companies
announce at the year end. The
better this stream of income
sounds, the more ignored and
neglected is this source of income.
5. Rental Income 4.1.1 Employee Compensation

This is the money that you get as a What Is Employee Compensation?

result of renting out an asset that
Employee compensation refers to
you have, like a house, or a
the benefits (cash, vacation, etc.)
building. Now, this income is even
that an employee receives in
better but there are inherent
exchange for the service they
drawbacks of this kind of income
provide to their employer.
over the above 4 types of incomes.
Employee compensation is
6. Capital Gains generally one of the largest costs
or expenses for any organization.
This is the money that you get as a
Approximately 92% of the working
result of increase in value of an
population in the United States is
asset that you own. For e.g. when
made of employees earning
you buy shares at $10 and sell
compensation from their
them at $11 - the $1 is capital
employer. There are many
gains, or if you buy your house for
different types of compensation
$200,000 and sell it for $220,000
paid to employees. The following
the $20,000 is your capital gain.
are a few examples of the
There are different tax laws in
compensation paid to employees:
different countries oncapital gains.
However, there are ways to come
around taxes as well.
There are four different types of
7. Royalty Income direct compensation for
employees. These include: 1)
This is the money you get as a
Hourly Compensation, 2) Salaries,
result of letting someone use your
3) Commissions and 4) Bonuses.
products, ideas, or processes. They
make all the revenues, they do all Types of compensation include:
the hard work and you get a small
 Base pay (hourly or salary
percentage of what ever they earn.
wages)
 Sales commission
 Overtime wages
 Tip income
 Bonus pay
 Recognition or merit pay
 Benefits (insurances,
standard vacation policy,
retirement)
 Stock options
 Other non-cash benefits