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# How to calculate net income?

Administrative Expenses \$ 79,500 Office Supplies \$ 9,300 Building 875,000 Retained Earnings 869,200 Capital Stock 129,000 Salaries Payable 7,100 Cash 48,800 Sales 957,000 Cost of Merchandise Sold 549,200 Sales Discounts 22,000 Dividends 33,000 Sales Returns and Allowances 55,600. show more Administrative Expenses \$ 79,500

Office Supplies \$ 9,300

Best Answer:   1. A company's total earnings (or profit). Net income is calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses. This number is found on a company's income statement and is an important measure of how profitable the company is over a period of time. The measure is also used to calculate earnings per share.

Often referred to as "the bottom line" since net income is listed at the bottom of the income statement. In the U.K. net income is known as "profit attributable to shareholders".

2. An individual’s income after deductions, credits and taxes are factored into gross income. Deductions and credits are

subtracted from gross income to arrive at taxable income, which is used to calculate income tax. Net income is income tax subtracted from taxable income.

1. Net income is calculated by starting with a company's total revenue. From this, the cost of sales, along with any other expenses that the company incurred during the period, is removed to reach earnings before tax. Tax is deducted from this amount to reach the net income number. Net income, like other accounting measures, is susceptible to manipulation through such things as aggressive revenue recognition or by hiding expenses. When basing an investment decision on net income numbers, it is important to review the quality of the numbers that were used to arrive at this value.

2. For example, suppose that your gross income is \$50,000 and you have \$20,000 in deductions and credits. This leaves you with a taxable income of \$30,000. Then, suppose that another \$5,000 of income tax is subtracted; the remaining \$25,000 will be your net income.