To summarize the important relationships in the income statement of a merchandising firm in equation form: Net sales = Sales revenue – Sales discounts – Sales returns and allowances. Gross margin = Net sales – Cost of goods sold. Total Operating Expenses = Selling expenses + Administrative expenses.
→Net Income formula is used for the calculation of the net income of the Company. It is the most important number for the Company, analysts, investors, and shareholders of the Company as it measures the profit earned by the Company over a period of time.
║Net Income = Total Revenues – Total Expenses║
Net Income or Net profit is calculated so that investors can measure the amount by which the total revenue exceeds the total expenses of the Company.
Total revenue includes earnings from the sale of goods and services, interest income, and Income from the sale of the business or other Income.
Total expenses include the cost of goods and services sold, operating expenses like salaries and wages, office maintenance, utilities and depreciation, and amortization, interest income, and taxes.
Example #1
Company ABC Inc. had revenue from the sale of $ 100,000 for the year 2017. It paid $ 20,000 as employee wages, $ 50,000 for raw materials and goods, $ 5,000 for other office and factory maintenance expenses. The Company had interest income of $ 3000 and paid $ 2500 in taxes. What is the net income of the Company ABC Inc.?
The Total revenue of the Company = Revenue from sale + Interest Income
Total revenue = 100000 + 3000 = 103,000
The Total expenses = Employee wages + raw materials + office and factory maintenance + interest income + taxes
Example
Company ABC Inc. had revenue from the sale of $ 100,000 for the year 2017. It paid $ 20,000 as employee wages, $ 50,000 for raw materials and goods, $ 5,000 for other office and factory maintenance expenses. The Company had interest income of $ 3000 and paid $ 2500 in taxes. What is the net income of the Company ABC Inc.?
The Total revenue of the Company = Revenue from sale + Interest Income
Total revenue = 100000 + 3000 = 103,000
The Total expenses = Employee wages + raw materials + office and factory maintenance + interest income + taxes
Answers & Comments
Answer:
To summarize the important relationships in the income statement of a merchandising firm in equation form: Net sales = Sales revenue – Sales discounts – Sales returns and allowances. Gross margin = Net sales – Cost of goods sold. Total Operating Expenses = Selling expenses + Administrative expenses.
Step-by-step explanation:
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Answer:
→Net Income formula is used for the calculation of the net income of the Company. It is the most important number for the Company, analysts, investors, and shareholders of the Company as it measures the profit earned by the Company over a period of time.
║Net Income = Total Revenues – Total Expenses║
Example #1
Company ABC Inc. had revenue from the sale of $ 100,000 for the year 2017. It paid $ 20,000 as employee wages, $ 50,000 for raw materials and goods, $ 5,000 for other office and factory maintenance expenses. The Company had interest income of $ 3000 and paid $ 2500 in taxes. What is the net income of the Company ABC Inc.?
The Total revenue of the Company = Revenue from sale + Interest Income
Total revenue = 100000 + 3000 = 103,000
The Total expenses = Employee wages + raw materials + office and factory maintenance + interest income + taxes
Example
Company ABC Inc. had revenue from the sale of $ 100,000 for the year 2017. It paid $ 20,000 as employee wages, $ 50,000 for raw materials and goods, $ 5,000 for other office and factory maintenance expenses. The Company had interest income of $ 3000 and paid $ 2500 in taxes. What is the net income of the Company ABC Inc.?
The Total revenue of the Company = Revenue from sale + Interest Income
Total revenue = 100000 + 3000 = 103,000
The Total expenses = Employee wages + raw materials + office and factory maintenance + interest income + taxes
Total expenses = 20000 + 50000 + 5000 + 3000 + 2500 = $ 80, 500
The Net Income = Total revenue – total expenses.
Net income = 103000 – 80500
Net income = $ 22,500