### How to Calculate Net Income

Definition: Net income is the amount of income a corporation earned after adjusting for the cost of doing business, interest, depreciation and other expenses.

Formula:
Net income = Net Sales - Expenses
Or: = Net Revenue - Total Expenses

Example 1:
Calculate the net income for Company PPC, given the following information:
Sales revenue \$88,000
Sales returns \$8,000
Cost of goods sold \$25,000
Depreciation of vehicles \$5,000
Salaries \$22,000
Electricity \$1,200
Interest expense \$1,000
Tax expense \$2,000

Solution:
Net Sales = Sales revenue - Sales returns = 88,000 - 8,000 = \$80,000
Net income = 80,000 - 25,000 - 5,000 - 22,000 - 1,200 - 1,000 - 2,000 = \$23,800

Example 2:
CPM Ltd. has the following data:
Net revenue \$100,000
Cost of goods sold \$45,000
Selling, General and Administrative Expenses \$50,000
Depreciation \$15,000
Interest expense \$2,100
Tax \$1,000

Then,
Net income / loss = 100,000 - 45,000 - 50,000 - 15,000 - 2,100 - 1,000 = - \$13,100 (net loss)