Understanding Accounting Basics 1

What does revenue in a business signify?

• Investments received

• Net loss

• Total expenses

• Money earned from sales

If a company's expenses exceed its revenue, what is this condition called?

• Revenue deficit

• Net income

• Gross profit

• Net loss

What is the correct formula to calculate net income?

• Revenue / Expenses

• Expenses - Revenue

• Revenue - Expenses

• Revenue + Expenses

Which statement is true about net income?

• It is always negative

• It decreases with higher revenue

• It is unrelated to revenue and expenses

• It is the leftover amount after subtracting expenses from revenue

How is net loss determined?

• When expenses are less than revenue

• When expenses equal revenue

• When revenue is greater than expenses

• When expenses exceed revenue

What component of owner's equity is affected by net income?

• None

• Capital

• Assets

• Liabilities

In Jill's example, what was her total revenue last month?

• $1,450

• $3,000

• $1,550

• $350

Which of the following is a component of Jill's expenses?

• Sales

• Profit

• Rent

• Investments

What financial statement details a company's revenues and expenses?

• Equity report

• Cash flow statement

• Income statement

• Balance sheet

What was Jill's net income last month?

• $1,550

• $3,000

• $1,450

• $350