Net loss occurs when

• A. total expenses exceed total revenue
• B. total revenue exceeds total expenses
• C. revenues are zero
• D. expenses equal revenues

Answer: (A)

Net loss happens when the business spends more than it earns. In other words, the bottom line is negative because total expenses exceed total revenue. When you subtract expenses from revenue and get a negative number, that negative result is a net loss. For example, if revenue is 50,000 and expenses are 60,000, the net result is -10,000, a net loss. If revenues exceed expenses, there is net income (a profit); if they’re equal, it’s break-even with no profit or loss. The core idea is comparing what the company brings in to what it spends; a larger expenditure than revenue produces a loss.