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Annual Income

Total value of income earned during a fiscal year

What is Annual Income?

Annual income is the total value of income earned during a fiscal year. Gross annual income refers to all earnings before any deductions are made, and net annual income refers to the amount that remains after all deductions are made. The concept applies to both individuals and businesses in preparing annual tax returns.

 

Annual Income

 

Hourly, Daily, Weekly, Monthly Income Conversion

You can easily convert your hourly, daily, weekly, or monthly income to annual figure by using some simple formulas show below.

To convert to annual income:

  • Hourly: Multiply by 2,000
  • Daily: Multiply by 200
  • Weekly: Multiply by 50
  • Monthly: Multiply by 12

Below, we will show an example of how to move between the time periods.

 

Example of Annual Income Calculator

Let’s work through an example of how to calculate the yearly figure by using a simple example. Assume that Sally earns $25.00 per hour at her job. What would her annual income be if she works 8 hours per day, 5 days per week, and 50 weeks per year?

Solution:

Hourly: Multiply $25 per hour by 2,000 working hours in a year (8 hours x 5 days per week x 50 weeks per year)

Daily: Multiply the $200 per day by 250 working days in a year (5 days per week x 50 weeks per year)

Weekly: Multiply the $1,000 per week by 50 working weeks per year

Monthly: Multiply the $4,167 per month by 12 months per year

 

Annual Income Calculator

 

Download CFI’s free Annual Income Calculator

 

Salary vs Wage

Employees who receive a salary are paid the same amount periodically, despite how many hours or days they work over a period of time. Employees who earn a wage are paid based on a rate that is multiplied by the number of hours or days they worked in a period.

For example, an employee who earns an annual salary of $50,000 is paid the same amount every two weeks, regardless of how many hours they worked each day in those two weeks.  The individual’s gross income every two weeks would be $1,923 (or $50,000 divided by 26 pay periods).

By contrast, an employee who is paid $25 per hour is paid $2,000 every two weeks if they work 8 hours per day, 5 days per week ($25 x 8 x 5 x 2).

 

Total Annual Income

For an individual or business with multiple income streams or sources of earnings, their total annual income will be equal to the sum of all the income sources.

For example, Sarah works part-time at Online Co earning $32,000 per year and also works part-time at Offline Co earning $21,000 per year, what is her total annual income?

$32,000 + $21,000 = $53,000 (Total gross annual income)

 

If Sarah is eligible for deductions of $5,000 for education and/or childcare expenses, she may be able to lower her taxable income in some jurisdictions. If this is the case, her net taxable income would be as follows:

$53,000 – $5,000 = $48,000 (Net taxable income)

 

Income, Revenue, and Earnings

In accounting and finance, the terms income, revenue, and earnings can often be used interchangeably. If a company refers to their annual revenue as being $20 million, they may also say that their gross income is $20 million.

After deducting all eligible operating expenses, they may say their pre-tax income or pre-tax earnings is $5 million.

 

Additional Resources

Thank you for reading this guide to understanding hourly, daily, weekly, monthly and annual earnings. To learn more, check out CFI’s financial modeling courses.

CFI is the official global provider of the Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to transform anyone into a world-class financial analyst. To continue advancing your career, these additional resources will be useful:

  • Cash Flow Statement
  • Balance Sheet
  • Projecting Income Statement Line Items
  • 3 Financial Statements

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