How to Measure Business Income

A business is usually measure with its financial position meaning that where the business is standing in which there are many factors that are needed to be checked for measuring the position of the business such as Goodwill.

Goodwill is a factor which means a business is paid for more than it’s worth, when the liquidation of the company takes place the business is sold for its standing price, all the assets, liabilities and capital is measured with its price suppose the total worth of the business is one hundred million dollars but the business is paid one hundred and ten million rupees, the additional ten million is the goodwill of the company that he has a certain name and fame in the market.

To see check the position of the company usually people use to go through the financial statements of the company such as Income Statement and Balance Sheet, an income statement shows the total earned income by the company for a specific period of time and the expenses that a company has done for the production and distribution of its product.

Whereas the balance sheet shows the true financial picture of the company its shows the total current and non-current of the company, total liabilities of the company and the total income and expenses of the company.

The revenues of the company use to stands as the profit of the company but for the profit it is not all that is shown the company need to minus its expenses from the profit (from the gross profit) and should show the accurate net income in the income statement.

For the income statements there are the accounts of the revenues that are earned in the specific period such as commissioned earned, sales and etc from which all the operating expenses are to be cut off and then you can find the net income of any company.

It is the product of the company or it is the merchandise of the company from which company use to earn that are sold to the customer on account and cash base system, a company’s revenue account is increased when there is an increase in the sale of the product.

Revenue account should always have a credit balance which shows that a company is healthier and does not include any loss, but in case a revenue account has debit balance it shows that company is running on the debt or packages that is nearly going be to liquidate.

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