Which of the following statements is TRUE of an income statement?
A) There is net income when total expenses are greater than total revenues.
B) There is a net loss when total expenses are less 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

Net income is calculated by subtracting total expenses from total revenues. Therefore, there is net income when total revenues are greater than total expenses. Option A is incorrect because net income occurs when total revenues are greater than total expenses, not the other way around. Option B is incorrect because a net loss occurs when total expenses are greater than total revenues. Option C is incorrect because total liabilities are not used in the calculation of net income or net loss.

Which of the Following Statements Is TRUE of an Income