What does net income mean on the CPA exam?
Net income. What is left after every revenue and expense of the period, including tax and discontinued operations. The bottom line of the income statement, and the figure that closes to retained earnings.
Defined against ASC 220-10-45.
Which CPA exam sections use net income?
Net income appears in 6 CPA exam sections: AUD, BAR, FAR, ISC, REG, TCP.
Other terms defined against ASC 220-10
- income statement: The statement of what was earned and spent over a period, ending in net income.
- net of tax: Stated after the tax effect has been taken out.
- other comprehensive income: Gains and losses that bypass net income and sit in equity until realized, such as unrealized gains on available-for-sale debt securities and foreign currency translation.
Related terms
- qualified business income: The net income from a domestic pass-through trade or business, excluding investment income and reasonable compensation.
- net profit margin: Net income divided by sales.
- taxable income: The figure the tax rates are applied to: gross income, less the deductions the Code allows.
- net capital gain: Net long-term capital gain minus net short-term capital loss.
- earned income: Compensation for personal services -- wages, or net earnings from self-employment.
- preferred dividends: Dividends owed to preferred shareholders before common receives anything.