Determining net income is the concluding step of the accounting cycle, and it’s crucial for assessing a company’s financial performance. To arrive at the net income figure, accountants utilize journal entries, which are chronological records of financial transactions. Understanding how to find net income from journal entries is fundamental for accountants, business owners, and financial analysts.
Net income is calculated by deducting expenses, including cost of goods sold, from revenues and adding other income. For instance, a company with $1 million in revenue, $500,000 in expenses, and $100,000 in other income would have a net income of $600,000. Tracking net income allows businesses to: