What is the formula for calculating net income/loss using the accounting equation?
submitted by Felix Austead

JillyBeanz

You wouldn't really calculate that directly from the accounting equation itself. You can get it from the income statement though. Essentially, it's revenue minus expenses. The accounting equation (Assets = Liabilities + Equity) shows the financial status, but net income is focused on the change in equity from revenue and expenses.

jameson

Well, net income is what you get when you subtract all your expenses from your total revenue. It's not really in the accounting equation.

I guess if you want to relate this to the accounting equation, net income increases equity, so: Net Income = Change in Equity + Dividends (if any), or just revenue minus expenses.