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This post shares a handful of fundamental formulas for bookkeeping. Better yet, we also introduce examples to catalyze and save time and money on bookkeeping operations for your business.

The formula for calculating the net income of a company is as follows:

Net Income = Revenue – Expenses – Tax

Revenue = Sales – Returns and Allowances

Expenses = Cost of Goods Sold, Selling, General and Administrative Costs, Depreciation and Amortization, Interest Expense, Other Expense (Including Losses/Gain from Disposition of Assets), Nonrecurring Gains/Losses from Discontinued Operations

Tax = Income Tax Rate × (Income – Exemptions) + Taxes on Investment Income + Taxes on Other Sources of Earnings

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How to Calculate Net Income (Formula and Examples)

Calculating and Subtracting Extra Expenses

Let’s take the example of a food company. The produce will be sold at a markup of 30 cents per pound. The selling, general, and administrative expenses will be $4 per pound sold, which amounts to approximately 32% of the cost of goods sold (CGS). The cost of goods sold is $7, and the company will have a gross profit of $3.

After recording the expenses and selling, general, and administrative expenses, we can subtract those amounts from the costs of goods sold to come up with net income. We can use a quick subtraction technique for this debit: Debit (D) – Expenses (E) – Cost of Goods (G) = Net Income.

In this example there will be no income tax to be deducted, so it is not necessary to calculate an income tax during the calculation process. Also, let’s assume that there are no withholding taxes on dividends or interest payments so it is not necessary to calculate any withholding taxes during this calculation process.

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Benefits of a Bookkeeping Assistant

The example above is a simple case involving only two types of expenses. In real life, a business might have to deal with a variety of expenses, and depending on the complexity of these calculations, the company might need a bookkeeping assistant for this process. The role of the bookkeeping assistant is to take care of the complicated calculations involved in businesses on behalf of the business owners. The bookkeeper will normally be trained in accounting procedures and techniques, including calculating taxes and filing tax returns.

 

Now affordable – Virtual Bookkeeping Assistants:

A full-time bookkeeping assistant can offer a range of financial services to businesses, including invoicing, data entry, and bank reconciliations. To get your business working properly while keeping your financial situation under control, consider hiring a dedicated, virtual bookkeeper who can help with bookkeeping duties from their home office.

More than a bookkeeping assistant:

Since you have your virtual assistant full-time, you can also offload other administrative tasks in your business to your virtual assistant. For example, some companies want to streamline their administrative process and do not feel comfortable delegating all the work to their staff. Sometimes keeping things simple is better. In this case, your virtual assistant will handle the administrative portion of these tasks and you will focus on sales, marketing, customer service and other business operations for your company.

If you are looking for a virtual assistant with a specific skill set or need bookkeeping assistant for your business, consider the #1 rated virtual assistant company, MyOutDesk.

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See For Yourself: A Closer Look at Virtual Assistants

The popularity and acceptance of virtual assistants will grow over the next decade. It is estimated that, in 2020, 40% of the entire US task force are virtual professionals. Today’s use cases for these task-oriented professionals are vast. “Freelance virtual assistant services” will be one of the biggest industries in terms of employment and global revenue by the end of the decade.

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“Outsourcing makes the hustle better — because you’re not burdened with many/growing expenses that you’ll need to figure out how to cover and hit profit”

 

 

Focus on your growth & scale your operations

 

 

ENVISIONING OF A NEW REALITY FOR YOUR BUSINESS

 

Simply put, MyOutDesk equips entrepreneurs & business owners with tools, strategies, and virtual employees – and when combined, businesses have a competitive edge and find growth while efficient systems and processes are put in place.

MyOutDesk proudly provides additional free business growth guides, books, and strategy calls.

See what we are about, and schedule a free ‘Double Your Business’ strategy consultation with us. We’ll take the time to learn more about your business and offer solutions to foster top talent and lower operational costs for your company.

 

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Did You Know?  MyOutDesk’s origin story is set during the last global financial crisis of 2008. Yes, that’s right — our business started by scaling businesses with virtual assistants during a recession! Our first client in 2008 went from five to seventeen VAs with a completely revamped organizational model in short order, and he told MyOutDesk, “Our virtual professionals have shaved $250,000 off our monthly overhead.”