(2023) What is a net income method?

With the income surplus calculation according to Section 4 (3) EStG, you can easily determine your business profit. Business income and expenses are recorded and compared using the cash basis principle. This simple form of accounting does not take provisions into account, for example.

Another advantage is that the income surplus calculation does not require the maintenance of inventory accounts or a stocktake.

If you determine your profit using the income surplus calculation, the surplus of your income over your business expenses is the profit that is declared for taxation in the tax return.