Net income formula: an example
Let’s say Wyatt’s Saddle Shop wants to find its net income for the first
quarter of 2021. Here are the numbers Wyatt is working with:
Total revenues: $60,000
Cost of goods sold (COGS): $20,000
Rent: $6,000
Utilities: $2,000
Payroll: $10,000
Advertising: $1,000
Interest expense: $1,000
First, Wyatt could calculate his gross income by taking his total
revenues, and subtracting COGS:
Gross income = $60,000 - $20,000 = $40,000
Next, Wyatt adds up his expenses for the quarter.
Expenses = $6,000 + $2,000 + $10,000 + $1,000 + $1,000 = $20,000
Now, Wyatt can calculate his net income by taking his gross income,
and subtracting expenses:
Net income = $40,000 - $20,000 = $20,000
Wyatt’s net income for the quarter is $20,000
How Bench can help
Net income is one of the most important line items on an income
statement. Your monthly income statement tells you how much money
is entering and leaving your business. An up-to-date income statement
is just one report small businesses gain access to through Bench.
Income statements—and other financial statements—are built from
your monthly books. At Bench, we do your bookkeeping and generate
monthly financial statements for you.
With Bench, you can see what your money is up to in easy-to-read
reports. Your income statement, balance sheet, and visual reports
provide the data you need to grow your business. So spend less time
wondering how your business is doing and more time making
decisions based on crystal-clear financial insights.