A company's net income is the bottom line of its income statement, and designates the net profit the company can keep after paying all of its expenses and income taxes. It equals revenues minus operating expenses minus income taxes. You can calculate your net profit after taxes using revenue and expense information from a particular accounting period. If your expenses and taxes are more than your revenues, you will have a net loss, which means your company paid out more money than it brought in during the period. You can compare your net profit after taxes with prior accounting periods to monitor your performance.
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Determine your net sales and cost of goods sold for an accounting period from your general ledger or trial balance.
Subtract cost of goods sold from net sales to determine gross profit. For example, subtract £130,000 in cost of goods sold from £325,000 in net sales. This equals £195,000 in gross profit.
Determine your total operating expenses, which include items like wages and utilities, for the accounting period from your general ledger or trial balance.
Subtract total operating expenses from gross profit to determine operating profit. For example, subtract £65,000 in operating expenses from £195,000 in gross profit. This equals £130,000 in operating profit.
Determine any other nonoperating income, nonoperating loss, interest income, interest expense and income tax expense for the accounting period from your general ledger or trial balance.
Add any nonoperating income and interest income to operating profit and subtract any nonoperating losses or expenses and income tax expense to determine net profit after taxes. For example, add £6,500 in nonoperating income to £130,000 in operating profit, and subtract £26,000 in interest expense and £45,500 in income tax expense. This equals £65,000 in net profit after taxes.
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