Net income is defined as

• A. The sum of all revenues minus the sum of all expenses
• B. The total of all assets minus liabilities
• C. The cash available to the company after expenses
• D. The change in equity for the period

Answer: (A)

Net income represents the profit earned over a period, calculated as revenues minus expenses. This captures the total earnings from the company’s core activities after all costs needed to run the business are subtracted. It’s an accrual measure of profitability, not a cash measure, so it can differ from cash on hand due to timing of receipts and payments.

The other ideas describe related but distinct concepts: assets minus liabilities equals equity, which is the owner’s claim on the company, not the period’s profit. Cash available after expenses points to cash flow or the cash balance, which can differ from net income because of non-cash items and timing differences. The change in equity for the period includes net income plus other contributions, withdrawals, and comprehensive items, so it isn’t the same as net income alone.