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Net Income Questions

Are you trying to figure the net income for a company? Are the balances not matching and you need help to fix this? Trying to plan a company’s finances is important so it can be successful. When questions arise that you need help with, consult with an Expert online for more information. Read below to find answers Experts provided regarding net income questions.

What is net income?

The net income of a company is the income that is determined after taking into consideration both cash and non cash transactions ending in total profits. Depreciation, amortization, credit sales, credit purchases, accrued expenses and unearned revenues are considered to be a part of the net income.

Should net income be the same on the balance and income statement?

It is important that it matches on both the balance sheet and income statement. This is because the income on the balance sheet is obtained from the income statement.

Is the net income similar to an operating cash flow of a company?

These may not be the same thing; however, there is a relationship between the two. The operating cash flow of a company is determined from the net income using a series of adjustments to working capital accounts that are on the balance sheet.

What is the formula for calculating the net income of a company?

The formula is as follows:

Net Income = Revenues of the Company – Expenses and Taxes of the Company

What is the first step in preparing the statement of cash flows for an organization?

The first step is determining the net income of the organization.

What is the formula for calculating the operating cash flow of a company?

The formula is as follows:

Operating Cash Flow = Net Income of the Company + Depreciation Expense. The net income in this formula would include any interest expense and income tax.

How much federal tax would a C Corporation pay if they donate all of its net income to charity?

The charitable deduction limit for a C Corporation is 10% of the corporation’s total taxable income. Therefore, even though the corporation donates all of the net income to charity, it may have to pay taxes on 90% of the net income.

Should the net income be added on the previous year’s member equity on a financial statement?

In most situations, the net income left after distributing profits is added on the previous year’s member equity on a financial statement.

How should the net income be distributed to the partner capital accounts in QuickBooks?

This is done through a journal entry.

What should be done if the net income on a balance sheet and income statement are different?

First, check if both incomes are on an accrual basis. In some cases, one of the incomes may have been changed to cash and as a result there may be a difference. Another thing that should be checked is if all the accounts are either assigned to a balance sheet account or income statement account.

It is important to understand what constitutes the net income of the company and how it may be calculated so the company’s finances are planned better. You can ask an Expert if you have any net income related questions. Finance Experts are available online to answer all your questions at your convenience. 

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