What is the formula of net profit?

As a CA with 10 years experience, let me break this down practically:Net Profit = Total Income - (Cost of Goods Sold + Operating Expenses + Depreciation + Amortization + Interest + Taxes)In simpler terms, it's everything you earn minus everything you spend. What many small business owners miss: Don't forget owner's salary - if you work in the business, include reasonable compensation as expense Include all taxes - not just income tax but also professional tax, etc. Account for depreciation - even if no cash moved, assets lose valueThe formula looks like this in practice:Sales ₹500,000 - Cost ₹200,000 - Expenses ₹150,000 - Interest ₹10,000 - Taxes ₹30,000 = Net Profit ₹110,000*This is crucial because it shows your business's true profitability after ALL costs. Track this monthly to make informed decisions!

The basic formula for net profit is:Net Profit = Total Revenue - Total ExpensesBut in accounting, it's more detailed:Net Profit = Gross Profit - Operating Expenses - Taxes - InterestWhere: Gross Profit = Revenue - Cost of Goods Sold Operating Expenses include salaries, rent, utilities, marketing, etc.* Taxes = income tax applicable* Interest** = interest on loansYou'll find this on the income statement as "Net Profit After Tax" or "Bottom Line." For example, if your business makes ₹10 lakh revenue with ₹6 lakh total expenses, your net profit is ₹4 lakh. This is what actually gets added to your retained earnings or can be distributed as dividends.