The term “net income” refers to what’s left of your gross income after expenses.
To review: gross income is money coming in the door before expenses are accounted for.
Net income is what’s left after expenses. If you spent more than you took in, you have a net loss.
For businesses with inventory, there’s actually a “middle” step involved in the calculation of net income or net loss. The formula in that case is: gross income – cost of goods sold = gross profit. Gross profit – expenses = net income or loss.
You’ll sometimes see net income referred to as “net profit” instead.
For more glossary terms, check out the extensive Glossary section on this website.
“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”