Calculating net income from gross income is a fundamental accounting operation used to assess a business’s overall profitability. Gross income represents a company’s total revenue minus any directly related expenses, such as the cost of goods sold or services provided.
Determining net income is crucial for businesses to track their financial performance, make informed decisions, and comply with regulatory reporting requirements. Historically, the concept of net income has evolved alongside accounting principles, with the development of standardized frameworks like Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) helping ensure consistent and transparent financial reporting.