State BPA Fundamental Accounting Practice Exam

If the total of the income statement debit column is greater than the credit column, what can be concluded?

1. The company earned net income

2. The company incurred a net loss

3. The records are incorrect

4. More revenue was recorded

The correct answer is: The company incurred a net loss

When the total of the income statement debit column exceeds the total of the credit column, it indicates that expenses and losses have outpaced revenues for the period. In accounting, the income statement summarizes a company's revenues and expenses; revenues are recorded as credits and expenses are recorded as debits. If the debit total is greater, it means that the total expenses are higher than the total revenues, resulting in a net loss for the company during that specific reporting period. This conclusion reflects that the company did not generate enough income to cover its expenses, leading to a negative financial outcome. Therefore, it is appropriate to characterize this situation as a net loss.