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The correct formula used to calculate Net Income or Net Profit is Revenues minus Expenses, so in the first blank, we write “ Revenues ” and in the second blank we write “ Expenses ”. Net income is transferred to Statement of Owners’ Equity where it is added to opening retained earnings for the period. In case of net loss, it is deducted from opening retained earnings in statement of retained earnings. In case of Net loss, no dividend is distributed to shareholders during the current accounting period. Net income / net profit shows that the company’s business is performing well in meeting daily expenses and earning revenues for the current accounting period. This performance affects the decision-making process of the investors and shareholders. For investors, they are more willing to invest in that company which show higher net profit as compare to its competitors in the market. For example, if company A has net income for the accounting period is $9,000, while its competitor comp...