(2024) What is a net income method?

With the income surplus calculation according to § 4 para. 3 EStG, you can easily determine your business profit. For this purpose, operating income and expenses are recorded and compared according to the cash basis principle. In this simple form of accounting, provisions are not taken into account.

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 operating expenses is the profit that is declared for taxation in the tax return.