During October, a firm had the following transactions involving revenue and expenses. Paid $1,400 for rent for October Provided services for $3,150 in cash Paid $330 for the October telephone service Provided services for $2,300 on credit Paid salaries of $1,875 to employees Paid $430 for the monthly office cleaning service Calculate the net income or net loss for the period

Net Income = $ 1,415

Explanation:

Net income is the excess of total revenue over and above total expenses. A net loss is recorded where the total revenue is less than the total expenses.

In calculating the net loss, revenue must be captured whether or not the cash has been received for sales made. In the same manner, expenses must be accounted for irrespective of whether they have been paid for or not.

So we can calculate the net inome for the firm as follows:

Revenue $

Service     3150

Service      2300

             5450

Expenses  

Rent     1400

Telephone          330

Salaries     1875

Cleaning            430

            4035

Net Income = 5450 -4035 = $ 1,415

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