The income statement presents a summary of an entity's revenues and expenses for a period of time. Which of the following statements is true of an income statement?
A)There is net income when total revenues are lesser than total expenses.
B)There is a net loss when total expenses are lesser than total revenue.
C)There is a net loss when total expenses are greater than total liabilities.
D)There is net income when total revenues are greater than total expenses.

Question

Quizplus · Accepted Answer

An income statement shows the financial performance of an organization over a specified period of time. It compares total revenues earned during the period with total expenses incurred to generate those revenues. If revenues exceed expenses, the result is a net income. Conversely, if expenses exceed revenues, the result is a net loss. Therefore, there is net income when total revenues are greater than total expenses.

The Income Statement Presents a Summary of an Entity's Revenues