Net income is the residual of revenues after deducting all expenses. In accounting, the net income is calculated in a profit or loss account that incorporates all types of expenses and deducts from revenues.
The complete format to reach net income is as follows.
|
Sales Revenue |
420,000.00 |
|
Less: Sales return |
(15,000.00) |
|
Less: Trade discount |
(22,000.00) |
|
Net Sales |
383,000.00 |
|
Less: Cost of Goods sold |
(180,000.00) |
|
Gross Profit |
203,000.00 |
|
Less: Operating expenses: |
|
|
Selling and administrative |
(10,500.00) |
|
Depreciation |
(4,000.00) |
|
Amortization |
(7,200.00) |
|
Operating Profit |
181,300.00 |
|
Less: Interest cost |
(48,000.00) |
|
Profit before tax |
133,300.00 |
|
Less: Taxes |
(18,000.00) |
|
Net Income |
115,300.00 |
When expenses are more than the revenues the end result is a net loss.
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