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?
A) There is net income when total revenues are greater than total expenses.
B) There is a net loss when total expenses are greater than total revenue.
C) There is a net loss when withdrawals are made.
D) Both A and B are true.

Question

Quizplus · Accepted Answer

Both statements A and B are true because net income is calculated as total revenue minus total expenses, so when total revenue is greater than total expenses, there is a net income. Conversely, when total expenses are greater than total revenue, there is a net loss. Statement C is not true since withdrawals are not included in the calculation of net income or net loss.

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