1.2: Net Income—A Critical Amount
The difference between the total revenue and total expense amounts for a particular period (such as a month or year), assuming revenue is higher, is profit. We will now refer to profit as net income . The following is a key calculation in determining a business’s operating results in dollars:
Revenue - Expenses = Net Income
Net income is determined by subtracting all expenses for a month (or year) from all revenue for that same month (or year). A net loss results if total expenses for a month (or year) exceed total revenue for the same period of time.
Net income is a result that business people are extremely interested in knowing since it represents the results of a firm’s operations in a given period of time.