When Expenses Exceed Revenues

question 34

Multiple Choice

When expenses exceed revenues,

• A) a net income will result.
• B) a net loss occurs.
• C) owner's equity increases.
• D) a liability is created.

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Definitions:

Fixed Assets

Long-term tangible assets that are used in the operations of a business and are not expected to be consumed or converted into cash within a year.

Percentage of Sales Approach

A forecasting method that estimates future financial outcomes based on a percentage relationship between sales growth and other financial accounts.

Financial Planning

The process of setting objectives, assessing assets and resources, estimating future financial needs, and making plans to achieve monetary goals.

Pro Forma Statement

A financial report created by making assumptions about events and transactions that have not yet taken place.