Multiple Choice
What is the term for earning money based on a percentage of total sales made?
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4. Merchandising Operations
Net Sales
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When is a budget considered to be balanced?
A
When net income is greater than zero
B
When net sales exceed total expenses
C
When total assets equal total liabilities
D
When total revenues equal total expenses
Verified step by step guidance1
Understand the concept of a balanced budget: A budget is considered balanced when the total revenues (income) are equal to the total expenses (outflows). This ensures that there is no surplus or deficit.
Analyze the options provided in the problem: Each option represents a different financial scenario. For example, net income greater than zero indicates a surplus, while net sales exceeding total expenses also suggests a surplus.
Focus on the correct definition: A balanced budget specifically refers to the equality between total revenues and total expenses, not other financial metrics like net income or net sales.
Relate the concept to accounting principles: In financial accounting, revenues and expenses are key components of the income statement. A balanced budget aligns with the principle of matching revenues and expenses.
Apply the correct answer to the problem: Based on the definition, the correct answer is 'When total revenues equal total expenses,' as this represents a balanced financial state.
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