How to Figure Out the Net Income on an Income Statement

Companies issue income statements to show the various sources of revenue and expenses they have during a specific accounting period, often a month or year. Net income can be measured either before taxes or after taxes using only the numbers provided on a company's balance sheet. The company's net income measures the company's profit for the specified period. If you own a business or are considering investing in one, you should make sure the net income is positive, indicating your business is profitable.

Instructions

1. Find the company's total revenues, costs of goods sold, sales costs and taxes on the income statement.

2. Add the cost of goods sold to the overhead and other sales costs to determine the total costs the company incurs in acquiring and selling its goods. For example, if the company has $300,000 in costs of goods sold and $100,000 in sales and overhead costs, add $100,000 to $300,000 to get a total of $400,000.

3. Subtract the total costs from the company's total revenues. For example, if the company has $940,000 in total revenues, subtract $400,000 from $940,000 to get $540,000 as the net income before taxes.

4. Subtract the taxes paid by the company to find the company's net income after taxes. In this example, if the company paid $175,000 in taxes, subtract $175,000 from $540,000 to get $365,000 as the company's net income after taxes.

References

• Pacific Lutheran University; Income Statement; Gerald M. Myers; 2004
• U.S. Securities and Exchange Commission: Beginners' Guide to Financial Statements