Question

Which situation indicates a net loss within the Income Statement section of the adjusted trial balance?

1) Total credits exceed total debits.
2) Total debits exceed total credits.
3) Total debits equal total credits.
4) None of the above.

Answer 1

A net loss within the Income Statement section of the adjusted trial balance occurs when the total debits exceed the total credits.

Step-by-step explanation:

A net loss within the Income Statement section of the adjusted trial balance indicates that the total debits exceed the total credits.

This means that the expenses incurred by the business exceed the revenue generated.

For example, if a company has $10,000 in expenses and $8,000 in revenue, there would be a net loss of $2,000 ($10,000 - $8,000) on the Income Statement.