Net income
In accounting, net income means revenues and gains less expenses and losses, including income tax, for the period — the bottom line of the P&L, before any allocation to non-controlling interests.
- Layer
- Lexicon
- Defined in
- Lexicon
- Components
- 4
Authority
This definition follows ASC 220.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
The lessons that teach this
Accounting, 0 to 1 — a free course taught end to end on one month of one company, with the spreadsheet exercises to work it yourself.
- 10The income statementTwo of the five account types, arranged so each subtotal answers a different question about how the month went.10 min
- 12The cash flow statementNorthwind earned $2,550 and its operations consumed $3,100. The third statement is the one that explains the difference, line by line.12 min
Net income, in use
Quoted from the 7 documents that use the word — what it does to an interface, in the spec's own sentence.
Appear below net income, in a separated non-GAAP block — never inside the P&L.
EBITDA, adjusted EBITDA, free cash flow, adjusted net income.
If shown, it appears below net income in a clearly separated reconciliation block — see metrics.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- How to read an income statement (P&L)Revenue, cost of revenue, gross margin, operating expenses and net income, read line by line, on accrual basis, with the mistakes founders make most.
- Cash flow statement explained: why profit isn’t cashHow the cash flow statement starts at net income, adds back non-cash costs and working capital, splits three activities and ties to the balance sheet.
- Balance sheet explained for startupsAssets equal liabilities plus equity. What each startup line means, from deferred revenue to the SAFE and the accumulated deficit, and why it must balance.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- profit in a statement
- earnings unqualified
Components that render this
The concept is not documentation-only. These are the components that name it in their specification, grouped and stated exactly as the catalog states them.
Terms this one depends on
Also in Foundations
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
- Retained earnings vs net incomeNet income is one period's profit; retained earnings is the running total of every period's net income less every dividend since the company began — a flow against a balance.Compare
- Journal entry for closing entriesAt the end of the fiscal year, debit every revenue account for its credit balance, credit every expense account for its debit balance, and take the difference — net income — to Retained earnings. Revenue and expense accounts start the new year at zero.Entry
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.