Resolved: Net Profit entry

Hi, 

thank you for reaching out, this is a very good question. 

Yes, there is an accounting entry for booking net income. It occurs only as part of month-end (or year-end) activities when we have to "close the accounts". 

We did not explain this in the lesson, but in short, every T-account should be closed by netting off the outstanding debits and credits. The corresponding entries go into a special Net Income account where profit is calculated. 

In our example, the accounting entries would look like this:

Dr Revenue $250 (to close the Revenue account)

Cr Net Income $250 (the corresponding Cr for the entry above)

Cr COGS $200 (to close the COGS account)

Dr Net Income $200 (the corresponding Dr for the entry above)

In this way, in the Net income account, you have $200 Dr and $250 Cr, which corresponds to a Net Income of $50. 

Again, this is a calculation accountants make at the end of the accounting period. 

I hope this answers your question. Please let us know if you have any other concerns. 

Best, 

The 365 Team