Is there an entry for the $50 Net Income ? And if yes , what should it look like ?

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

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Moataz Ahmed

Last answered:

10 Mar 2023

Posted on:

10 Mar 2023

Resolved: Net Profit entry

in Fundamentals of Financial Reporting / Basics of Accounting

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Antoniya Baltova

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Posted on:

10 Mar 2023

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Resolved: Net Profit entry

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