Asked Jan 23, 2019

How to compute the amount of net income or net loss


Expert Answer

Step 1

Net Income or net loss is computed by preparing the income statement.

The first step in computing the income statement is summing up of various revenues like sales revenue, service revenues, interest incomes, rent revennues, etc.


Step 2

Next step is to sum up all the expenses incurred in earning that revenues like cost of goods sold, selling expenses, administrative expenses, depreciation expenses, interest expenses, etc.

Step 3

The next step is to find the difference between revenues total and total of expense. When the revenues are higher than expenses, then...

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