Accounting, the systematic recording and providing of financial and non-financial information about an organization to internal and external users, plays a crucial role in calculating net income, the financial performance of a company over a period. Net income is the profit or loss resulting from a company’s business activities after deducting all expenses, including operating, interest, and tax expenses, from its revenue.
Understanding the process of calculating net income is paramount for stakeholders, such as investors and creditors, to assess a company’s financial health, profitability, and overall performance. It enables the identification of trends, the evaluation of investment opportunities, and the making of informed financial decisions.