The net operating loss on a business expense sheet is the difference between your company's expenses and its revenues. When you have a net operating loss, your business's taxable income is less than zero. You can use your net operating loss to reduce your individual tax liability, and if you experience a high operating loss, you may reduce your individual tax liability for many consecutive years. But you must first calculate your net loss using other values on your business's income statement.
Add together all your business's expenses to calculate your total operating costs and expenses. For example, if you spend $40,000 on materials, $10,000 on administrative expenses and $2,000 on miscellaneous costs such as impairment, you have total operating costs and expenses of $52,000.
Subtract these costs from your total revenues. For example, if you experience revenues of $30,000, subtract $52,000 from $30,000 to get -$22,000.
Add to this value miscellaneous income such as interest and income on discontinued operations. For example, if you made an additional $3,000 from these other avenues, add $3,000 to -$22,000 to get -$19,000. This is your net income.
Subtract your net income from 0. Continuing the example, subtract -$19,000 from 0 to get $19,000. This is your net operating loss.
