Question

How is net income calculated in an income statement?

Answer 1

To calculate net income in an income statement, subtract all expenses and taxes from total revenue.

Step-by-step explanation:

To calculate net income in an income statement, you need to subtract all the expenses and taxes from the total revenue. Net income is the final amount left after accounting for all the costs. Here is the step-by-step process:

1. Add up all the sales revenue or income generated by the business.
2. Subtract the cost of goods sold (COGS) or the direct costs associated with providing the goods or services.
3. Deduct all the operating expenses, including rent, utilities, salaries, and advertising costs.
4. Factor in any non-operating income or expenses, such as interest income or one-time charges.
5. Calculate the income tax expense based on the applicable tax rate.
6. Finally, subtract the tax expense from the total income to get the net income.

For example, if a company's total revenue is $10,000, COGS is $2,000, operating expenses are $3,000, and income tax rate is 20%, the net income would be: $10,000 - $2,000 - $3,000 - ($10,000 x 20%) = $2,000.