Net income

Net income is the profit remaining after all expenses — cost of goods sold, operating costs, interest, and income tax — have been deducted from revenue. It sits at the foot of the income statement, often called the bottom line.

Also known asnet profit · bottom line

ByHoang TruongUpdated June 30, 2026

See it move

Loading infographic...

The infographic is a waterfall chart that opens at revenue of €500,000 and descends through four deduction bars: cost of goods sold (€280,000), operating expenses (€120,000), interest (€10,000), and tax (€18,000). The final bar lands at net income of €72,000, the residual that belongs to the owners after all claims on revenue have been settled.

Where it fits

SubjectFinancial AccountingCoreTopicRevenue, Expenses & ProfitCore

The formula

LaTeX

NI = Rev - COGS - OpEx - I - T

Variables

$N I$: Net income (the bottom line) (€)
$R e v$: Total revenue (€)
$C O GS$: Cost of goods sold (€)
$O pE x$: Operating expenses (selling, general and administrative) (€)
$I$: Interest expense (€)
$T$: Income tax expense (€)

Net income flows into retained earnings on the balance sheet each period and is the residual available to shareholders.

Check yourself

PracticeCORE

A company reports for the year: revenue €600,000; cost of goods sold €330,000; operating expenses €95,000; interest expense €18,000; income tax €31,400. What is net income?

Select an answer to check your understanding.

If you trained under a national GAAP

DE · HGBWhere national-GAAP intuition diverges from the international standard

HGB (German)

Under HGB the annual result (Jahresüberschuss) is a single bottom-line figure; almost all gains and losses — including foreign exchange differences and changes to provisions — pass through this line. There is no separate other comprehensive income section, so the reported net income captures a broader range of value changes than its IFRS counterpart.

IFRS

IAS 1 splits performance reporting into profit or loss and other comprehensive income (OCI). Remeasurements such as unrealised fair value movements on certain financial instruments, revaluation surpluses on non-current assets, and actuarial gains and losses on defined-benefit pension plans are recognised in OCI and may never be recycled to profit or loss, meaning they permanently bypass the net income line.