Dictionary / Net Income
What does Net Income mean in accounting?
Quick definition
GeneralThe profit left after you subtract all expenses from revenue.
Read more below
People also call this net profit or net earnings. On a QuickBooks Online or Xero profit and loss, the line is usually labeled Net Income.
Examples
Sales minus every cost
You run a coffee company. The month's revenue is $18,000. Beans, cups, rent, and wages add up to $14,500. Net income is $3,500: what is left after every expense. In QuickBooks Online or Xero, open the profit and loss and read the Net Income line, not the sales total.
Sales is not what you earned
You run a clothing store. The month's sales are $22,000 and cost of goods sold is $9,000, so gross profit is $13,000. Rent, wages, and card fees are another $10,200, so net income is $2,800. If someone asks what the shop made, quote $2,800. The $22,000 is revenue; the $13,000 is leftover after product cost only.
Why it matters
You will read this at every close. It is the leftover on the income statement after every expense, not just the cost of what you sold. Lenders and tax packets treat it as what the period earned. Quote sales or gross profit and you are leaving out rent, wages, and interest. Quote the bank balance and you are answering a cash question.
Further reading
Compare this term with reference material from other accounting and finance websites.
Keep learning
Start with the bookkeeping basics, then compare software when you are ready to pick a tool.
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Is net income the same as net profit?
Yes. Net profit and net earnings are other names for the same leftover after all expenses.
Is net income the same as cash?
No. Profit can sit in unpaid invoices, and cash can go up from a loan. The bank balance is a balance sheet question.
How do I calculate net income?
Start with revenue. Subtract every expense and cost for the period. What is left is net income. A negative leftover is a net loss.
Where do I see net income in QuickBooks or Xero?
Open the profit and loss (the income statement). The last line is usually labeled Net Income. Set the dates to the month or year you just closed.