What is the Bottom Line in Accounting?
The bottom line in the accounting context refers to a company’s profit, net income, earnings, or earnings per share. The term ‘bottom line’ is a literal pointer to the net income figure as per the company’s income statement. The term is used to state that a company is increasing/decreasing net earnings. A company that is increasing its overall profits or reducing its costs is said to be ‘improving its bottom line’.
More About Bottom Line
Irrespective of the variations in the layout, all of them have the net income stated at the end of the financial statement. The income statement begins with a company’s sales or service revenue of the main business activity in the topmost section. Other sources of revenue of the company are listed next.
The further sections of the statement may vary based on the industry/company standards. However, in the last section of the statement, the total revenue minus total expenses will be calculated to conclude the net income for the accounting period. This result will be available for dividend distributions or company retention.
What is Top Line?
The top line in the accounting context refers to a company’s revenue or gross sales. When a company is said to have top-line growth, it means the company is seeing a growth in gross sales and revenue.
Methods to Increase Bottom Line
An increase in top-line revenue can directly increase the bottom line. This can be realised by increasing the production, reducing sales returns, improving the products/services, widening the product range, or by increasing the price of products.
Investment income, interest income, rental fees collected and the money raised from the sale of any equipment or property can also increase the bottom line.
Reducing expenses is also a way of increasing bottom line income. This can be done either by using cheaper raw materials in the production or using efficient methods for the same. Reducing employee salary, using less expensive machinery, keeping the cost of capital within the bar are also ways of reducing the expenses.
