Net income - What is net income?
Net income is the amount of profit a business has earned after all expenses have been deducted. If the net income is negative (i.e. the expenses exceeds sales), then the business is not making a profit.
Debitoor makes it easy to calculate your net income and keep on top of your invoicing and accounting needs. Try Debitoor for free with a 7 day trial!
Net income is calculated by subtracting expenses. (taxes, cost of goods sold, operating expenses etc.) from the sales revenue.
Net income is essential to calculate how profitable a business is in any given period. Net income may also be referred to as net profit or net earnings.
Examples of how to calculate net income
If a restaurant business had a sales amount of £5000, and their expenses (cost of goods, employee wages, taxes, rent etc.) amounted to £3000, the restaurant’s net income would be £2000.
The following is an example of calculating net income for an individual rather than a company. If an individual had a yearly gross salary of £30,000, and the taxes and expenses amounted to £5000, the individual’s net income would be £25,000. This is the individual’s take-home pay.
What is the difference between net worth and net income?
Net worth is the total value of a person or business calculated by the total value of your assets, and the total value of your liabilities. The amount in which your assets exceed your liabilities indicates your total net worth. Essentially, your net worth is everything you own of importance.
On the contrary, net income is what you or your business has earned. Put simply, it is the amount of money that has been earned through business operations after all related costs have been paid.
Net income and Debitoor
With Debitoor, it is easy to calculate your net income and view all of the relevant accounting documents your company requires.
Net income can be shown on your income statement and can be found on your Debitoor dashboard under ‘Reports’. You will also find other important documents in that section including the VAT report and the balance sheet. Debitoor automatically updates these reports as you conduct your business.