How do you determine net income?

Question

I start up a wp company with $5000. I pay $450 in rent, $300 cash for office supplies & $50 for phone usage. I purchase $800 in resume paper. In the 1st month of business I sell $1800 in word processing services, using $200 worth of resume paper.

What is my net income for the month?
What is the total of my expenses?
What are my total assets?
What is my revenue for the month?

Answer 1

It depends on what accounting system you are using. If you are using a cash basis, you claim the expense when you pay for it and the net income would be your revenue minus your expense.



On a cash basis, your net income would be $200, $1,800 in revenue less $1,600 in expenses.



If you using the accrual basis, there really isn't enough information to tell you what your net income is. Revenue is recorded when it is earned, not when it is received. Under an accrual accounting system, the $800 paper purchase would go in as an asset, and then as you use the paper it would be written off as an expense. and this doesn't include any labor expenses.



Just on the information you have given, under an accrual accounting system:



Revenue: $1,800

Expenses: $1,000

Net Income: $800

Assets: Cash on Hand: $5,200 (start up cash plus net cash flow)

Paper stock: $600



It would be a good idea to find a bookkeeper or a CPA to set up an accounting system for you. All of this can be automatically generated from any accounting program (Quickbooks, Quicken, MS Money, etc) if it is set up properly.

Answer 2

You are trying to find loopholes and that is commendable. I'd consult an attorney to see if there are other ways to reduce your liability. IL is renowned to be horrible for people having to pay. Here's what that guidelines say: Net income is the total of all income from all sources, minus the following deductions: Federal income tax; State income tax; Social Security (FICA); Mandatory retirement contributions; Union dues; Dependent and individual health/hospitalization insurance premiums; Prior obligations of support or maintenance actually paid pursuant to a court order or administrative order; Expenses to repay debts that represent reasonable and necessary expenses for the production of income; Medical expenses necessary to preserve life or health; and Reasonable expenses for the benefit of the child and the other parent, exclusive of gifts. If net income cannot be determined, the court shall order support in an amount considered reasonable in the particular case. If net income cannot be determined in administrative cases, the Department uses a standard amount based on the state’s minimum wage to arrive at the monthly support obligation. The Department is given the authority to establish support through an administrative process. Support orders established through this process have the same force and effect as a judicial order. (45 CFR 300.0 or 89 IL Administrative Code, Sec. 160.60 or 305 ILCS 5/Art. X). You may be better off having them base it off of the min wage. Best of luck.

Answer 3

i pay rent too... sometimes my cash flow is tight. i found a site where you can pay rent with a credit card. www.ricochetaps.com

good luck...small businesses need more networking to help each other out in these tough times!!!

Answer 4

net income is always $0. nets do not work, and therefore they do not make money. nets are tools used by humans for fishing and trapping elephants.