Definition of "Bottom Line Accounting"

Bottom line accounting focuses on the net income of a business.

Bottom line accounting is a type of accounting that focuses on only one thing: net income. Net income is considered the "bottom line" in accounting, and this number is what really matters to businesses.

Income Statement

Companies prepare income statements monthly and yearly. An income statement shows all the company's revenues minus all the company's expenses. The difference in these numbers is the company's net income.

Net Income and Net Loss

A company adds up all revenues for a period and all expenses. The expenses are subtracted from the revenues, and the end result is net income. If expenses are greater than revenues, the result is a net loss.

Bottom Line Growth

Companies experience bottom line growth when they experience a huge cost reduction in a thing. For example, the reduction may stem from a raw material purchased for much cheaper than before, therefore causing a significant cost savings for the company.

Efficiency

Bottom line accounting focuses on a company's efficiency with spending and controlling costs. This type of accounting studies cost savings and tries to find ways for a company to become more efficient.

References

• Investor Glossary: Bottom Line