What is Net Profit / Net Income Or Net Loss In Accounting

Net Profit / Net Income means the net result of Income / Revenues minus Expenses i.e., Revenues - Expenses or during a particular Accounting Period Revenues exceeds the Expenses of the same period while Net Loss is the reverse situation i.e., it it the excess of Expenses over Revenues or Income during a Accounting Period. Profit or Loss is very important factor for checking Financial Performance of the business. To Find out Net Income / Net Loss for the Accounting Period, Income Statement or Profit And Loss Account is prepared.

In the form of Equation, we write as:

Net Profit / Net Income / Net Loss = Revenues - Expenses

It is also calculated in case of Sole Proprietorship as shown below:

Opening Capital + Further Capital Introduced + (Net Income) - (Net Loss) - Drawings = Closing Capital

Net Income / Net Loss = Closing Capital - Opening Capital - Further Capital Introduced + Drawings

In case of company, the equation is:

Opening Equity + Reserves + (Net Income) - (Net Loss) - Dividends = Closing Equity

Net Income / Net Loss = Closing Equity - Opening Equity - Reserves + Dividends

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So, the Net Income is calculated for business in order to calculate or net income or net Loss of the business for the accounting period.