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 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 the excess of total revenues over total expenses. Therefore, there is net income when total revenues are greater than total expenses. Option A is incorrect because it states the opposite, and option B is incorrect because it confuses the meanings of expenses and revenues. Option C is incorrect because liabilities are not relevant in determining net income.

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