How to calculate net income using cash basis accounting is a crucial task for businesses, providing insights into financial performance and tax liabilities. In cash basis accounting, revenue is recognized when received, and expenses are recognized when paid, offering a simpler approach than accrual accounting.
Net income, calculated as revenue minus expenses, is essential for evaluating profitability and making informed decisions. This method is widely used by small businesses, freelance contractors, and individuals due to its straightforward nature.