{"id":296993,"date":"2026-01-19T16:28:20","date_gmt":"2026-01-19T03:28:20","guid":{"rendered":"https:\/\/www.reckon.com\/nz\/?post_type=glo&p=296993"},"modified":"2026-01-28T12:30:10","modified_gmt":"2026-01-27T23:30:10","slug":"net-income","status":"publish","type":"glo","link":"https:\/\/www.reckon.com\/nz\/glossary\/net-income\/","title":{"rendered":"What is Net Income?"},"content":{"rendered":"

[et_pb_section fb_built=”1″ custom_padding_last_edited=”off|desktop” _builder_version=”4.27.2″ custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” custom_padding_phone=”0px||||false|false” da_disable_devices=”off|off|off” locked=”off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.27.2″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” locked=”off” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” pac_dcm_carousel_specific_module_num=”0″ border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” pac_dcm_carousel_specific_module_num=”0″ global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Intro” _builder_version=”4.27.5″ header_2_font_size=”32px” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

Net income \u2013 a term that\u2019s also known as the bottom line \u2013 is a financial metric within business accounting that reflects the profitability of a business after all their operating expenses, taxes and other costs have been deducted from the total revenue.<\/p>\n

To think of it another way: it\u2019s the most comprehensive measure of a company\u2019s financial performance. That\u2019s why it\u2019s so often used by business owners, investors and lenders to figure out a company\u2019s profitability and operational efficiency.<\/p>\n

Net income defined<\/h2>\n

At its core, net income is the amount of profit a business earns over a specific accounting period. It\u2019s calculated using the following formula:<\/p>\n

Net income = Total revenue \u2013 Total expenses<\/em><\/strong><\/p>\n

[\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2024\/12\/Net-Income-Equation-2.png” title_text=”Net Income Equation 2″ align=”center” _builder_version=”4.27.2″ _module_preset=”default” custom_margin=”|-30px|||false|false” global_colors_info=”{}”][\/et_pb_image][et_pb_text _builder_version=”4.27.5″ _module_preset=”default” hover_enabled=”0″ global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

Total business expenses tend to include the cost of goods sold (COGS), operating expenses<\/a>, interest, taxes, depreciation and amortisation. The result shows the earnings available to owners and shareholders, or the amount for reinvestment in the business.<\/p>\n

How to calculate net income<\/h2>\n

Before taxes you’ll have an idea about the company’s gross income. Here are five easy steps for calculating net income:<\/p>\n

    \n
  1. Start with total revenue:<\/strong> Including income from all sources, such as sales or services provided.<\/li>\n
  2. Subtract cost of goods sold:<\/strong> COGS covers direct costs like raw materials, production labour, inventory and more. The result is gross profit (not net profit).<\/li>\n
  3. Deduct operating expenses:<\/strong> This includes salaries, rent, utilities, marketing and other administrative costs.<\/li>\n
  4. Factor in non-operating expenses:<\/strong> Subtract interest on loans, one-time expenses or other miscellaneous costs.<\/li>\n
  5. Subtract taxes:<\/strong> Account for tax obligations with the regular income statement in order to arrive at the final net earnings figure.<\/li>\n<\/ol>\n

    Example calculation<\/h2>\n

    Let\u2019s say a company earns $500,000 in total revenue during the year. Its expenses include:<\/p>\n