BUSINESS MATH 4TH worked.

Someone receiving a
QUARTER REVIEWER salary is usually in a management
or professional position.

Someone who is paid wages

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