When calculating net income, which of the following should be included?

When calculating net income, the correct approach is to consider both billed and received amounts, which reflects the total revenue generated within the period. This method encompasses all income that has been earned, regardless of whether it has been collected in cash at that particular time.

Including both billed and received amounts allows a business to accurately assess its financial performance over a specific timeframe. Billed amounts represent sales that have been recognized and are expected to be received, while received amounts contribute to actual cash inflow. This comprehensive view enables better financial analysis and decision-making.

In contrast, focusing solely on the amount billed would overlook income that has already been received, leading to an incomplete picture of financial status. Likewise, considering only received amounts ignores revenue that has been recognized and is pending collection, thus potentially undervaluing the business's performance. Lastly, accounting exclusively for amounts paid out pertains to expenditures and does not directly influence the calculation of net income, which is primarily concerned with revenues. Therefore, the inclusion of both billed and received amounts provides the most accurate assessment of a business's net income.