Which completes: A ___________ occurs when expenses are greater than income.

Which completes: A ___________ occurs when expenses are greater than income.

• A. net income
• B. net loss
• C. net gain
• D. net profit

Answer: (B)

When expenses exceed income, you have a net loss. Net means after all expenses are subtracted from income, so a negative result shows a loss. This deficit would need to be covered from reserves or other funding. In contrast, net income or net profit describes a positive surplus (income greater than expenses), and net gain usually refers to an increase in value rather than a cash shortfall. So the described situation matches a net loss.

When expenses exceed income, you have a net loss. Net means after all expenses are subtracted from income, so a negative result shows a loss. This deficit would need to be covered from reserves or other funding. In contrast, net income or net profit describes a positive surplus (income greater than expenses), and net gain usually refers to an increase in value rather than a cash shortfall. So the described situation matches a net loss.