Income measurement is a fundamental accounting concept, and yet the computation of periodic income has caused the accounting profession some difficulty.Economists and accountants have long debated what constitutes income and how it should be measured.The capital maintenance and transactional methods have been advocated as means of determining and measuring periodic income.Discuss these two income concepts.

The capital maintenance concept focuses on the net assets of an organization.Under this concept, periodic net income is the change in the net assets from the beginning of the period to the end of the period, excluding owner investments and distributions.The valuation and determination of assets and liabilities is of prime importance, rather than revenues and expenses.The transactional approach, on the other hand, computes net income as the difference between revenues (and gains)and expenses (and losses).Revenue recognition and expense matching conventions are of supreme importance.Asset and liability valuations are not critical to the determination of periodic net income.