What term describes the financial situation when expenses exceed income?

What term describes the financial situation when expenses exceed income?

• A. Surplus
• B. Deficit
• C. Balance
• D. Profit

Answer: (B)

The term that describes the financial situation when expenses exceed income is a deficit. A deficit occurs when an individual's or organization's outgoings surpass their earnings, resulting in a shortfall. This situation can lead to borrowing or the need to reduce expenses in order to regain financial balance. In contrast, a surplus occurs when income exceeds expenses, indicating a positive financial position. The term balance refers to a situation where income and expenses are equal, showing no surplus or deficit. Profit specifically pertains to a financial gain resulting from revenue exceeding costs in a business context, which is the opposite of a deficit. Understanding these terms is crucial for analyzing financial health, whether it be at a personal, corporate, or governmental level.

The term that describes the financial situation when expenses exceed income is a deficit. A deficit occurs when an individual's or organization's outgoings surpass their earnings, resulting in a shortfall. This situation can lead to borrowing or the need to reduce expenses in order to regain financial balance.

In contrast, a surplus occurs when income exceeds expenses, indicating a positive financial position. The term balance refers to a situation where income and expenses are equal, showing no surplus or deficit. Profit specifically pertains to a financial gain resulting from revenue exceeding costs in a business context, which is the opposite of a deficit. Understanding these terms is crucial for analyzing financial health, whether it be at a personal, corporate, or governmental level.