To calculate net income, you need to know total revenue and total expenses
. The basic formula is net income equals total revenue minus total expenses
. Net income is the amount of money earned after subtracting all business expenses, taxes, and interest for a specific period
. It is also referred to as net profit, net earnings, or the bottom line
. The formulas to calculate net income are:
- Net Income = Revenue – Cost of Goods Sold – Expenses
- Net Income = Total Revenue – Total Expenses
- Net Income = $$Revenue + Other Income] – Cost of Goods Sold (COGS) – Operating Expenses – Other Expenses – Interest – Taxes
For an individual, calculating net income involves subtracting all expenses, including taxes and debt obligations, from total income earned during a specific period
. This can include expenses such as mortgage or rent, car expenses, groceries, entertainment, utilities, cell phone, clothing, health insurance, subscriptions, student loans, and retirement savings
. To calculate net income as an employee, you need to determine your gross salary, consider pension contributions, identify your tax code, work out your taxable income, and calculate tax and national insurance contributions
