Net Income

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Net income is equal to the income that a firm has after subtracting costs and expenses from the total revenue. Expenses will typically include tax expense. For a merchandising company, subtracted costs may be the cost of goods sold, sales discounts, and sales returns and allowances. For a product company advertising, manufacturing, and design and development costs are included.

Net income is sometimes called the bottom line because it is typically found on the last line of a company's income statement.

An equation for net income in merchandising:

Net income or Net loss = Revenue - Cost of goods sold - Sales discounts - Sales returns and allowances - Expenses = Profit

Another term that is closely related to this is top line. As the Total Revenue forms the first line of the account statement, it is often called top line.

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